Correlation Between Ciputra Development and Lippo Karawaci

Can any of the company-specific risk be diversified away by investing in both Ciputra Development and Lippo Karawaci at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ciputra Development and Lippo Karawaci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ciputra Development Tbk and Lippo Karawaci Tbk, you can compare the effects of market volatilities on Ciputra Development and Lippo Karawaci and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ciputra Development with a short position of Lippo Karawaci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ciputra Development and Lippo Karawaci.

Diversification Opportunities for Ciputra Development and Lippo Karawaci

-0.16

Correlation Coefficient

Ciputra Development  Lippo Karawaci

Good diversification

The 3 months correlation between Ciputra and Lippo is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ciputra Development Tbk and Lippo Karawaci Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo Karawaci Tbk and Ciputra Development is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ciputra Development Tbk are associated (or correlated) with Lippo Karawaci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo Karawaci Tbk has no effect on the direction of Ciputra Development i.e., Ciputra Development and Lippo Karawaci go up and down completely randomly.

Pair Corralation between Ciputra Development and Lippo Karawaci

Assuming the 90 days trading horizon Ciputra Development Tbk is expected to under-perform the Lippo Karawaci. But the stock apears to be less risky and, when comparing its historical volatility, Ciputra Development Tbk is 1.89 times less risky than Lippo Karawaci. The stock trades about -0.13 of its potential returns per unit of risk. The Lippo Karawaci Tbk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,100  in Lippo Karawaci Tbk on September 1, 2024 and sell it today you would earn a total of  2,600  from holding Lippo Karawaci Tbk or generate 32.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ciputra Development Tbk  vs.  Lippo Karawaci Tbk

Ciputra Development Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciputra Development Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lippo Karawaci Tbk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lippo Karawaci Tbk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lippo Karawaci disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ciputra Development and Lippo Karawaci

The main advantage of trading using opposite Ciputra Development and Lippo Karawaci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ciputra Development position performs unexpectedly, Lippo Karawaci can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lippo Karawaci will offset losses from the drop in Lippo Karawaci's long position.

The idea behind Ciputra Development Tbk and Lippo Karawaci Tbk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.