Correlation Between Modernland Realty and Ciputra Development

Can any of the company-specific risk be diversified away by investing in both Modernland Realty and Ciputra Development 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 Modernland Realty and Ciputra Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Modernland Realty Ltd and Ciputra Development Tbk, you can compare the effects of market volatilities on Modernland Realty and Ciputra Development 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 Modernland Realty with a short position of Ciputra Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modernland Realty and Ciputra Development.

Diversification Opportunities for Modernland Realty and Ciputra Development

-0.08

Correlation Coefficient

Modernland Realty  Ciputra Development

Good diversification

The 3 months correlation between Modernland and Ciputra is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Modernland Realty Ltd and Ciputra Development Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciputra Development Tbk and Modernland Realty 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 Modernland Realty Ltd are associated (or correlated) with Ciputra Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciputra Development Tbk has no effect on the direction of Modernland Realty i.e., Modernland Realty and Ciputra Development go up and down completely randomly.

Pair Corralation between Modernland Realty and Ciputra Development

Assuming the 90 days trading horizon Modernland Realty Ltd is expected to generate 0.55 times more return on investment than Ciputra Development. However, Modernland Realty Ltd is 1.82 times less risky than Ciputra Development. It trades about -0.05 of its potential returns per unit of risk. Ciputra Development Tbk is currently generating about -0.18 per unit of risk. If you would invest  5,200  in Modernland Realty Ltd on December 2, 2024 and sell it today you would lose (200.00) from holding Modernland Realty Ltd or give up 3.85% of portfolio value over 90 days.

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

Modernland Realty Ltd  vs.  Ciputra Development Tbk

Modernland Realty

Risk-Adjusted Performance

Very Weak

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

Ciputra Development Tbk

Risk-Adjusted Performance

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 weak 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 Modernland Realty and Ciputra Development

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

The idea behind Modernland Realty Ltd and Ciputra Development 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.