Correlation Between Kioson Komersial and NFC Indonesia

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

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

Diversification Opportunities for Kioson Komersial and NFC Indonesia

-0.24

Correlation Coefficient

Kioson Komersial  NFC Indonesia

Very good diversification

The 3 months correlation between Kioson and NFC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kioson Komersial Indonesia 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 Kioson Komersial 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 Kioson Komersial Indonesia 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 Kioson Komersial i.e., Kioson Komersial and NFC Indonesia go up and down completely randomly.

Pair Corralation between Kioson Komersial and NFC Indonesia

Assuming the 90 days trading horizon Kioson Komersial Indonesia is expected to under-perform the NFC Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Kioson Komersial Indonesia is 1.68 times less risky than NFC Indonesia. The stock trades about -0.11 of its potential returns per unit of risk. The NFC Indonesia PT is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  770,000  in NFC Indonesia PT on September 3, 2024 and sell it today you would lose (652,500) from holding NFC Indonesia PT or give up 84.74% of portfolio value over 90 days.

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

Kioson Komersial Indonesia  vs.  NFC Indonesia PT

Kioson Komersial Ind

Risk-Adjusted Performance

1 of 100

Weak

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

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kioson Komersial and NFC Indonesia

The main advantage of trading using opposite Kioson Komersial and NFC Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kioson Komersial 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 Kioson Komersial Indonesia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.