Correlation Between Matahari Putra and Ciputra Development

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

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

Diversification Opportunities for Matahari Putra and Ciputra Development

-0.32

Correlation Coefficient

Matahari Putra  Ciputra Development

Very good diversification

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

Pair Corralation between Matahari Putra and Ciputra Development

Assuming the 90 days trading horizon Matahari Putra Prima is expected to generate 3.24 times more return on investment than Ciputra Development. However, Matahari Putra is 3.24 times more volatile than Ciputra Development Tbk. It trades about 0.1 of its potential returns per unit of risk. Ciputra Development Tbk is currently generating about -0.15 per unit of risk. If you would invest  5,100  in Matahari Putra Prima on September 16, 2024 and sell it today you would earn a total of  1,900  from holding Matahari Putra Prima or generate 37.25% return on investment over 90 days.

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

Matahari Putra Prima  vs.  Ciputra Development Tbk

Matahari Putra Prima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Putra Prima are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Matahari Putra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ciputra Development Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciputra Development 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 Matahari Putra and Ciputra Development

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

The idea behind Matahari Putra Prima and Ciputra Development 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.