Correlation Between Lancartama Sejati and Planet Properindo

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

By analyzing existing cross correlation between Lancartama Sejati Tbk and Planet Properindo Jaya, you can compare the effects of market volatilities on Lancartama Sejati and Planet Properindo 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 Lancartama Sejati with a short position of Planet Properindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancartama Sejati and Planet Properindo.

Diversification Opportunities for Lancartama Sejati and Planet Properindo

0.32

Correlation Coefficient

Lancartama Sejati  Planet Properindo

Weak diversification

The 3 months correlation between Lancartama and Planet is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lancartama Sejati Tbk and Planet Properindo Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Properindo Jaya and Lancartama Sejati 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 Lancartama Sejati Tbk are associated (or correlated) with Planet Properindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Properindo Jaya has no effect on the direction of Lancartama Sejati i.e., Lancartama Sejati and Planet Properindo go up and down completely randomly.

Pair Corralation between Lancartama Sejati and Planet Properindo

Assuming the 90 days trading horizon Lancartama Sejati is expected to generate 2.97 times less return on investment than Planet Properindo. But when comparing it to its historical volatility, Lancartama Sejati Tbk is 1.22 times less risky than Planet Properindo. It trades about 0.05 of its potential returns per unit of risk. Planet Properindo Jaya is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Planet Properindo Jaya on September 14, 2024 and sell it today you would earn a total of  800.00  from holding Planet Properindo Jaya or generate 33.33% return on investment over 90 days.

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

Lancartama Sejati Tbk  vs.  Planet Properindo Jaya

Lancartama Sejati Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lancartama Sejati Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lancartama Sejati may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Planet Properindo Jaya

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Lancartama Sejati and Planet Properindo

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

The idea behind Lancartama Sejati Tbk and Planet Properindo Jaya 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.