Correlation Between Capital Financial and Lippo Cikarang
Can any of the company-specific risk be diversified away by investing in both Capital Financial 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 Capital Financial and Lippo Cikarang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Financial Indonesia and Lippo Cikarang Tbk, you can compare the effects of market volatilities on Capital Financial 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 Capital Financial with a short position of Lippo Cikarang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Financial and Lippo Cikarang.
Diversification Opportunities for Capital Financial and Lippo Cikarang
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Capital and Lippo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Capital Financial 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 Capital Financial 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 Capital Financial 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 Capital Financial i.e., Capital Financial and Lippo Cikarang go up and down completely randomly.
Pair Corralation between Capital Financial and Lippo Cikarang
Assuming the 90 days trading horizon Capital Financial Indonesia is expected to generate 0.69 times more return on investment than Lippo Cikarang. However, Capital Financial Indonesia is 1.45 times less risky than Lippo Cikarang. It trades about -0.18 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 55,000 in Capital Financial Indonesia on September 2, 2024 and sell it today you would lose (4,000) from holding Capital Financial Indonesia or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Financial Indonesia vs. Lippo Cikarang Tbk
Performance |
| Timeline |
| Capital Financial |
| Lippo Cikarang Tbk |
Capital Financial and Lippo Cikarang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Financial and Lippo Cikarang
The main advantage of trading using opposite Capital Financial and Lippo Cikarang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Financial 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.| Capital Financial vs. Ace Hardware Indonesia | Capital Financial vs. Merdeka Copper Gold | Capital Financial vs. Mitra Pinasthika Mustika | Capital Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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