Correlation Between Citra Marga and Lautan Luas

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

By analyzing existing cross correlation between Citra Marga Nusaphala and Lautan Luas Tbk, you can compare the effects of market volatilities on Citra Marga and Lautan Luas 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 Citra Marga with a short position of Lautan Luas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citra Marga and Lautan Luas.

Diversification Opportunities for Citra Marga and Lautan Luas

-0.32

Correlation Coefficient

Citra Marga  Lautan Luas

Very good diversification

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

Pair Corralation between Citra Marga and Lautan Luas

Assuming the 90 days trading horizon Citra Marga Nusaphala is expected to under-perform the Lautan Luas. But the stock apears to be less risky and, when comparing its historical volatility, Citra Marga Nusaphala is 1.04 times less risky than Lautan Luas. The stock trades about -0.12 of its potential returns per unit of risk. The Lautan Luas Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  100,500  in Lautan Luas Tbk on September 13, 2024 and sell it today you would lose (500.00) from holding Lautan Luas Tbk or give up 0.5% of portfolio value over 90 days.

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

Citra Marga Nusaphala  vs.  Lautan Luas Tbk

Citra Marga Nusaphala

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citra Marga Nusaphala has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Citra Marga is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lautan Luas Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lautan Luas Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Lautan Luas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citra Marga and Lautan Luas

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

The idea behind Citra Marga Nusaphala and Lautan Luas 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.