Correlation Between Lippo Cikarang and Fortune Mate

Can any of the company-specific risk be diversified away by investing in both Lippo Cikarang and Fortune Mate 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 Lippo Cikarang and Fortune Mate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lippo Cikarang Tbk and Fortune Mate Indonesia, you can compare the effects of market volatilities on Lippo Cikarang and Fortune Mate 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 Lippo Cikarang with a short position of Fortune Mate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lippo Cikarang and Fortune Mate.

Diversification Opportunities for Lippo Cikarang and Fortune Mate

0.21

Correlation Coefficient

Lippo Cikarang  Fortune Mate

Modest diversification

The 3 months correlation between Lippo and Fortune is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lippo Cikarang Tbk and Fortune Mate Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Mate Indonesia and Lippo Cikarang 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 Lippo Cikarang Tbk are associated (or correlated) with Fortune Mate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Mate Indonesia has no effect on the direction of Lippo Cikarang i.e., Lippo Cikarang and Fortune Mate go up and down completely randomly.

Pair Corralation between Lippo Cikarang and Fortune Mate

Assuming the 90 days trading horizon Lippo Cikarang Tbk is expected to under-perform the Fortune Mate. But the stock apears to be less risky and, when comparing its historical volatility, Lippo Cikarang Tbk is 2.7 times less risky than Fortune Mate. The stock trades about -0.06 of its potential returns per unit of risk. The Fortune Mate Indonesia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  54,500  in Fortune Mate Indonesia on December 3, 2024 and sell it today you would lose (8,100) from holding Fortune Mate Indonesia or give up 14.86% of portfolio value over 90 days.

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

Lippo Cikarang Tbk  vs.  Fortune Mate Indonesia

Lippo Cikarang Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lippo Cikarang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Fortune Mate Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortune Mate Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Fortune Mate 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 Lippo Cikarang and Fortune Mate

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

The idea behind Lippo Cikarang Tbk and Fortune Mate Indonesia 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.