Correlation Between Ciputra Development and Metropolitan Land

Can any of the company-specific risk be diversified away by investing in both Ciputra Development and Metropolitan Land 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 Metropolitan Land 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 Metropolitan Land Tbk, you can compare the effects of market volatilities on Ciputra Development and Metropolitan Land 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 Metropolitan Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ciputra Development and Metropolitan Land.

Diversification Opportunities for Ciputra Development and Metropolitan Land

0.73

Correlation Coefficient

Ciputra Development  Metropolitan Land

Poor diversification

The 3 months correlation between Ciputra and Metropolitan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ciputra Development Tbk and Metropolitan Land Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Land 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 Metropolitan Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Land Tbk has no effect on the direction of Ciputra Development i.e., Ciputra Development and Metropolitan Land go up and down completely randomly.

Pair Corralation between Ciputra Development and Metropolitan Land

Assuming the 90 days trading horizon Ciputra Development Tbk is expected to under-perform the Metropolitan Land. In addition to that, Ciputra Development is 1.3 times more volatile than Metropolitan Land Tbk. It trades about 0.0 of its total potential returns per unit of risk. Metropolitan Land Tbk is currently generating about 0.03 per unit of volatility. If you would invest  38,881  in Metropolitan Land Tbk on September 13, 2024 and sell it today you would earn a total of  2,919  from holding Metropolitan Land Tbk or generate 7.51% return on investment over 90 days.

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

Ciputra Development Tbk  vs.  Metropolitan Land 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Metropolitan Land Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Land Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Metropolitan Land is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ciputra Development and Metropolitan Land

The main advantage of trading using opposite Ciputra Development and Metropolitan Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ciputra Development position performs unexpectedly, Metropolitan Land 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 Metropolitan Land will offset losses from the drop in Metropolitan Land's long position.

The idea behind Ciputra Development Tbk and Metropolitan Land 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.