Correlation Between Lippo General and Cisarua Mountain

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

By analyzing existing cross correlation between Lippo General Insurance and Cisarua Mountain Dairy, you can compare the effects of market volatilities on Lippo General and Cisarua Mountain 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 General with a short position of Cisarua Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lippo General and Cisarua Mountain.

Diversification Opportunities for Lippo General and Cisarua Mountain

-0.3

Correlation Coefficient

Lippo General  Cisarua Mountain

Very good diversification

The 3 months correlation between Lippo and Cisarua is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lippo General Insurance and Cisarua Mountain Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisarua Mountain Dairy and Lippo General 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 General Insurance are associated (or correlated) with Cisarua Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisarua Mountain Dairy has no effect on the direction of Lippo General i.e., Lippo General and Cisarua Mountain go up and down completely randomly.

Pair Corralation between Lippo General and Cisarua Mountain

Assuming the 90 days trading horizon Lippo General Insurance is expected to generate 1.2 times more return on investment than Cisarua Mountain. However, Lippo General is 1.2 times more volatile than Cisarua Mountain Dairy. It trades about 0.11 of its potential returns per unit of risk. Cisarua Mountain Dairy is currently generating about -0.1 per unit of risk. If you would invest  32,200  in Lippo General Insurance on December 30, 2024 and sell it today you would earn a total of  5,800  from holding Lippo General Insurance or generate 18.01% return on investment over 90 days.

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

Lippo General Insurance  vs.  Cisarua Mountain Dairy

Lippo General Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lippo General Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lippo General disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cisarua Mountain Dairy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cisarua Mountain Dairy 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lippo General and Cisarua Mountain

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

The idea behind Lippo General Insurance and Cisarua Mountain Dairy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.