Correlation Between Lionmesh Prima and Indospring Tbk

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

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

Diversification Opportunities for Lionmesh Prima and Indospring Tbk

0.64

Correlation Coefficient

Lionmesh Prima  Indospring Tbk

Poor diversification

The 3 months correlation between Lionmesh and Indospring is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lionmesh Prima Tbk and Indospring Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indospring Tbk and Lionmesh Prima 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 Lionmesh Prima Tbk are associated (or correlated) with Indospring Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indospring Tbk has no effect on the direction of Lionmesh Prima i.e., Lionmesh Prima and Indospring Tbk go up and down completely randomly.

Pair Corralation between Lionmesh Prima and Indospring Tbk

Assuming the 90 days trading horizon Lionmesh Prima Tbk is expected to generate 2.73 times more return on investment than Indospring Tbk. However, Lionmesh Prima is 2.73 times more volatile than Indospring Tbk. It trades about 0.03 of its potential returns per unit of risk. Indospring Tbk is currently generating about -0.23 per unit of risk. If you would invest  40,000  in Lionmesh Prima Tbk on September 14, 2024 and sell it today you would earn a total of  1,600  from holding Lionmesh Prima Tbk or generate 4.0% return on investment over 90 days.

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

Lionmesh Prima Tbk  vs.  Indospring Tbk

Lionmesh Prima Tbk

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lionmesh Prima Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lionmesh Prima may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indospring Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indospring 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 Lionmesh Prima and Indospring Tbk

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

The idea behind Lionmesh Prima Tbk and Indospring 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.