Correlation Between Digital Mediatama and NFC Indonesia

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

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

Diversification Opportunities for Digital Mediatama and NFC Indonesia

-0.43

Correlation Coefficient

Digital Mediatama  NFC Indonesia

Very good diversification

The 3 months correlation between Digital and NFC is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Digital Mediatama Maxima 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 Digital Mediatama 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 Digital Mediatama Maxima 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 Digital Mediatama i.e., Digital Mediatama and NFC Indonesia go up and down completely randomly.

Pair Corralation between Digital Mediatama and NFC Indonesia

Assuming the 90 days trading horizon Digital Mediatama Maxima is expected to generate 0.75 times more return on investment than NFC Indonesia. However, Digital Mediatama Maxima is 1.33 times less risky than NFC Indonesia. It trades about 0.13 of its potential returns per unit of risk. NFC Indonesia PT is currently generating about 0.02 per unit of risk. If you would invest  11,900  in Digital Mediatama Maxima on September 1, 2024 and sell it today you would earn a total of  10,100  from holding Digital Mediatama Maxima or generate 84.87% return on investment over 90 days.

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

Digital Mediatama Maxima  vs.  NFC Indonesia PT

Digital Mediatama Maxima

Risk-Adjusted Performance

14 of 100

Good

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

NFC Indonesia PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFC Indonesia PT 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Digital Mediatama and NFC Indonesia

The main advantage of trading using opposite Digital Mediatama and NFC Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Mediatama 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 Digital Mediatama Maxima 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.