Correlation Between Lippo Karawaci and Mega Manunggal

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

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

Diversification Opportunities for Lippo Karawaci and Mega Manunggal

0.42

Correlation Coefficient

Lippo Karawaci  Mega Manunggal

Very weak diversification

The 3 months correlation between Lippo and Mega is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lippo Karawaci Tbk and Mega Manunggal Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Manunggal Property and Lippo Karawaci 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 Lippo Karawaci Tbk are associated (or correlated) with Mega Manunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Manunggal Property has no effect on the direction of Lippo Karawaci i.e., Lippo Karawaci and Mega Manunggal go up and down completely randomly.

Pair Corralation between Lippo Karawaci and Mega Manunggal

Assuming the 90 days trading horizon Lippo Karawaci Tbk is expected to under-perform the Mega Manunggal. In addition to that, Lippo Karawaci is 1.53 times more volatile than Mega Manunggal Property. It trades about -0.02 of its total potential returns per unit of risk. Mega Manunggal Property is currently generating about 0.14 per unit of volatility. If you would invest  40,400  in Mega Manunggal Property on September 22, 2024 and sell it today you would earn a total of  10,100  from holding Mega Manunggal Property or generate 25.0% return on investment over 90 days.

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

Lippo Karawaci Tbk  vs.  Mega Manunggal Property

Lippo Karawaci Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mega Manunggal Property

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mega Manunggal Property are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mega Manunggal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lippo Karawaci and Mega Manunggal

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

The idea behind Lippo Karawaci Tbk and Mega Manunggal Property 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.