Correlation Between Solusi Bangun and Ciputra Development

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

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

Diversification Opportunities for Solusi Bangun and Ciputra Development

-0.2

Correlation Coefficient

Solusi Bangun  Ciputra Development

Good diversification

The 3 months correlation between Solusi and Ciputra is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Solusi Bangun Indonesia 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 Solusi Bangun 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 Solusi Bangun Indonesia 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 Solusi Bangun i.e., Solusi Bangun and Ciputra Development go up and down completely randomly.

Pair Corralation between Solusi Bangun and Ciputra Development

Assuming the 90 days trading horizon Solusi Bangun Indonesia is expected to under-perform the Ciputra Development. In addition to that, Solusi Bangun is 1.25 times more volatile than Ciputra Development Tbk. It trades about -0.04 of its total potential returns per unit of risk. Ciputra Development Tbk is currently generating about 0.02 per unit of volatility. If you would invest  97,227  in Ciputra Development Tbk on September 3, 2024 and sell it today you would earn a total of  9,773  from holding Ciputra Development Tbk or generate 10.05% return on investment over 90 days.

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

Solusi Bangun Indonesia  vs.  Ciputra Development Tbk

Solusi Bangun Indonesia

Risk-Adjusted Performance

1 of 100

Weak

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

0 of 100

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Solusi Bangun and Ciputra Development

The main advantage of trading using opposite Solusi Bangun and Ciputra Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solusi Bangun 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 Solusi Bangun Indonesia 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.