Correlation Between Bank Yudha and NFC Indonesia

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

By analyzing existing cross correlation between Bank Yudha Bhakti and NFC Indonesia PT, you can compare the effects of market volatilities on Bank Yudha and NFC Indonesia 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 Bank Yudha with a short position of NFC Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Yudha and NFC Indonesia.

Diversification Opportunities for Bank Yudha and NFC Indonesia

-0.37

Correlation Coefficient

Bank Yudha  NFC Indonesia

Very good diversification

The 3 months correlation between Bank and NFC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank Yudha Bhakti and NFC Indonesia PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFC Indonesia PT and Bank Yudha 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 Bank Yudha Bhakti are associated (or correlated) with NFC Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFC Indonesia PT has no effect on the direction of Bank Yudha i.e., Bank Yudha and NFC Indonesia go up and down completely randomly.

Pair Corralation between Bank Yudha and NFC Indonesia

Assuming the 90 days trading horizon Bank Yudha Bhakti is expected to under-perform the NFC Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Bank Yudha Bhakti is 1.47 times less risky than NFC Indonesia. The stock trades about -0.26 of its potential returns per unit of risk. The NFC Indonesia PT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  122,500  in NFC Indonesia PT on December 1, 2024 and sell it today you would earn a total of  1,000.00  from holding NFC Indonesia PT or generate 0.82% return on investment over 90 days.

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

Bank Yudha Bhakti  vs.  NFC Indonesia PT

Bank Yudha Bhakti

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Yudha Bhakti 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NFC Indonesia PT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NFC Indonesia PT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, NFC Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Yudha and NFC Indonesia

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

The idea behind Bank Yudha Bhakti and NFC Indonesia PT 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.