Correlation Between GM and Lippo Cikarang

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

By analyzing existing cross correlation between General Motors and Lippo Cikarang Tbk, you can compare the effects of market volatilities on GM 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 GM with a short position of Lippo Cikarang. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Lippo Cikarang.

Diversification Opportunities for GM and Lippo Cikarang

-0.34

Correlation Coefficient

GM  Lippo Cikarang

Very good diversification

The 3 months correlation between GM and Lippo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Lippo Cikarang go up and down completely randomly.

Pair Corralation between GM and Lippo Cikarang

Allowing for the 90-day total investment horizon General Motors is expected to generate 0.97 times more return on investment than Lippo Cikarang. However, General Motors is 1.03 times less risky than Lippo Cikarang. It trades about -0.16 of its potential returns per unit of risk. Lippo Cikarang Tbk is currently generating about -0.37 per unit of risk. If you would invest  5,612  in General Motors on September 19, 2024 and sell it today you would lose (497.00) from holding General Motors or give up 8.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Lippo Cikarang Tbk

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lippo Cikarang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lippo Cikarang 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 GM and Lippo Cikarang

The main advantage of trading using opposite GM and Lippo Cikarang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.

The idea behind General Motors and Lippo Cikarang 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.