Correlation Between NFC Indonesia and Bank Yudha

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

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

Diversification Opportunities for NFC Indonesia and Bank Yudha

0.38

Correlation Coefficient

NFC Indonesia  Bank Yudha

Weak diversification

The 3 months correlation between NFC and Bank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Bank Yudha Bhakti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Yudha Bhakti and NFC Indonesia 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 NFC Indonesia PT are associated (or correlated) with Bank Yudha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Yudha Bhakti has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Bank Yudha go up and down completely randomly.

Pair Corralation between NFC Indonesia and Bank Yudha

Assuming the 90 days trading horizon NFC Indonesia PT is expected to generate 1.13 times more return on investment than Bank Yudha. However, NFC Indonesia is 1.13 times more volatile than Bank Yudha Bhakti. It trades about 0.1 of its potential returns per unit of risk. Bank Yudha Bhakti is currently generating about 0.01 per unit of risk. If you would invest  106,000  in NFC Indonesia PT on September 1, 2024 and sell it today you would earn a total of  11,500  from holding NFC Indonesia PT or generate 10.85% return on investment over 90 days.

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

NFC Indonesia PT  vs.  Bank Yudha Bhakti

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.

Bank Yudha Bhakti

Risk-Adjusted Performance

0 of 100

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NFC Indonesia and Bank Yudha

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

The idea behind NFC Indonesia PT and Bank Yudha Bhakti 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.