Correlation Between Star Pacific and Lautan Luas

Can any of the company-specific risk be diversified away by investing in both Star Pacific and Lautan Luas 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 Star Pacific and Lautan Luas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Star Pacific Tbk and Lautan Luas Tbk, you can compare the effects of market volatilities on Star Pacific and Lautan Luas 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 Star Pacific with a short position of Lautan Luas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Pacific and Lautan Luas.

Diversification Opportunities for Star Pacific and Lautan Luas

0.22

Correlation Coefficient

Star Pacific  Lautan Luas

Modest diversification

The 3 months correlation between Star and Lautan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Star Pacific Tbk and Lautan Luas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lautan Luas Tbk and Star Pacific 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 Star Pacific Tbk are associated (or correlated) with Lautan Luas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lautan Luas Tbk has no effect on the direction of Star Pacific i.e., Star Pacific and Lautan Luas go up and down completely randomly.

Pair Corralation between Star Pacific and Lautan Luas

Assuming the 90 days trading horizon Star Pacific Tbk is expected to generate 5.22 times more return on investment than Lautan Luas. However, Star Pacific is 5.22 times more volatile than Lautan Luas Tbk. It trades about 0.04 of its potential returns per unit of risk. Lautan Luas Tbk is currently generating about 0.02 per unit of risk. If you would invest  22,600  in Star Pacific Tbk on October 10, 2024 and sell it today you would earn a total of  2,000  from holding Star Pacific Tbk or generate 8.85% return on investment over 90 days.

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

Star Pacific Tbk  vs.  Lautan Luas Tbk

Star Pacific Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Star Pacific Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Star Pacific may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lautan Luas Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lautan Luas Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Lautan Luas 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 Star Pacific and Lautan Luas

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

The idea behind Star Pacific Tbk and Lautan Luas 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.