Correlation Between Multipolar Technology and NFC Indonesia

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

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

Diversification Opportunities for Multipolar Technology and NFC Indonesia

-0.31

Correlation Coefficient

Multipolar Technology  NFC Indonesia

Very good diversification

The 3 months correlation between Multipolar and NFC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Multipolar Technology Tbk 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 Multipolar Technology 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 Multipolar Technology Tbk 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 Multipolar Technology i.e., Multipolar Technology and NFC Indonesia go up and down completely randomly.

Pair Corralation between Multipolar Technology and NFC Indonesia

Assuming the 90 days trading horizon Multipolar Technology Tbk is expected to generate 0.96 times more return on investment than NFC Indonesia. However, Multipolar Technology Tbk is 1.04 times less risky than NFC Indonesia. It trades about 0.14 of its potential returns per unit of risk. NFC Indonesia PT is currently generating about -0.06 per unit of risk. If you would invest  163,075  in Multipolar Technology Tbk on September 3, 2024 and sell it today you would earn a total of  1,976,925  from holding Multipolar Technology Tbk or generate 1212.28% return on investment over 90 days.

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

Multipolar Technology Tbk  vs.  NFC Indonesia PT

Multipolar Technology Tbk

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Technology Tbk are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multipolar Technology 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Multipolar Technology and NFC Indonesia

The main advantage of trading using opposite Multipolar Technology and NFC Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multipolar Technology 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 Multipolar Technology Tbk 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.