Correlation Between Bank Negara and Lippo Cikarang
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Lippo Cikarang 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 Bank Negara and Lippo Cikarang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Lippo Cikarang Tbk, you can compare the effects of market volatilities on Bank Negara and Lippo Cikarang 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 Bank Negara with a short position of Lippo Cikarang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Lippo Cikarang.
Diversification Opportunities for Bank Negara and Lippo Cikarang
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Lippo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Lippo Cikarang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo Cikarang Tbk and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with Lippo Cikarang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo Cikarang Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Lippo Cikarang go up and down completely randomly.
Pair Corralation between Bank Negara and Lippo Cikarang
Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 0.67 times more return on investment than Lippo Cikarang. However, Bank Negara Indonesia is 1.5 times less risky than Lippo Cikarang. It trades about -0.1 of its potential returns per unit of risk. Lippo Cikarang Tbk is currently generating about -0.33 per unit of risk. If you would invest 520,000 in Bank Negara Indonesia on September 2, 2024 and sell it today you would lose (22,000) from holding Bank Negara Indonesia or give up 4.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Lippo Cikarang Tbk
Performance |
| Timeline |
| Bank Negara Indonesia |
| Lippo Cikarang Tbk |
Bank Negara and Lippo Cikarang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Lippo Cikarang
The main advantage of trading using opposite Bank Negara and Lippo Cikarang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Lippo Cikarang 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 Lippo Cikarang will offset losses from the drop in Lippo Cikarang's long position.| Bank Negara vs. Ace Hardware Indonesia | Bank Negara vs. Merdeka Copper Gold | Bank Negara vs. Mitra Pinasthika Mustika | Bank Negara vs. Jakarta Int Hotels |
| Lippo Cikarang vs. Lippo Karawaci Tbk | Lippo Cikarang vs. Mitra Pinasthika Mustika | Lippo Cikarang vs. Jakarta Int Hotels | Lippo Cikarang vs. Indosterling Technomedia Tbk |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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