Correlation Between PT Lippo and Aroundtown

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

By analyzing existing cross correlation between PT Lippo Karawaci and Aroundtown SA, you can compare the effects of market volatilities on PT Lippo and Aroundtown 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 PT Lippo with a short position of Aroundtown. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Lippo and Aroundtown.

Diversification Opportunities for PT Lippo and Aroundtown

-0.17

Correlation Coefficient

PT Lippo  Aroundtown

Good diversification

The 3 months correlation between PTLKF and Aroundtown is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding PT Lippo Karawaci and Aroundtown SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aroundtown SA and PT Lippo 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 PT Lippo Karawaci are associated (or correlated) with Aroundtown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aroundtown SA has no effect on the direction of PT Lippo i.e., PT Lippo and Aroundtown go up and down completely randomly.

Pair Corralation between PT Lippo and Aroundtown

Assuming the 90 days horizon PT Lippo Karawaci is expected to generate 0.66 times more return on investment than Aroundtown. However, PT Lippo Karawaci is 1.51 times less risky than Aroundtown. It trades about 0.13 of its potential returns per unit of risk. Aroundtown SA is currently generating about -0.17 per unit of risk. If you would invest  0.90  in PT Lippo Karawaci on December 27, 2024 and sell it today you would earn a total of  0.10  from holding PT Lippo Karawaci or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

PT Lippo Karawaci  vs.  Aroundtown SA

PT Lippo Karawaci

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Lippo Karawaci are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward-looking signals, PT Lippo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aroundtown SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aroundtown SA 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Lippo and Aroundtown

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

The idea behind PT Lippo Karawaci and Aroundtown SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.