Correlation Between Mandala Multifinance and Lippo General

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

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

Diversification Opportunities for Mandala Multifinance and Lippo General

-0.47

Correlation Coefficient

Mandala Multifinance  Lippo General

Very good diversification

The 3 months correlation between Mandala and Lippo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mandala Multifinance Tbk and Lippo General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo General Insurance and Mandala Multifinance 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 Mandala Multifinance Tbk are associated (or correlated) with Lippo General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo General Insurance has no effect on the direction of Mandala Multifinance i.e., Mandala Multifinance and Lippo General go up and down completely randomly.

Pair Corralation between Mandala Multifinance and Lippo General

Assuming the 90 days trading horizon Mandala Multifinance Tbk is expected to generate 0.96 times more return on investment than Lippo General. However, Mandala Multifinance Tbk is 1.04 times less risky than Lippo General. It trades about 0.09 of its potential returns per unit of risk. Lippo General Insurance is currently generating about -0.02 per unit of risk. If you would invest  149,474  in Mandala Multifinance Tbk on September 12, 2024 and sell it today you would earn a total of  185,526  from holding Mandala Multifinance Tbk or generate 124.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

Mandala Multifinance Tbk  vs.  Lippo General Insurance

Mandala Multifinance Tbk

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mandala Multifinance Tbk are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mandala Multifinance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lippo General Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lippo General Insurance 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 Mandala Multifinance and Lippo General

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

The idea behind Mandala Multifinance Tbk and Lippo General Insurance 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.