Correlation Between NFC Indonesia and Sentral Mitra

Can any of the company-specific risk be diversified away by investing in both NFC Indonesia and Sentral Mitra 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 Sentral Mitra 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 Sentral Mitra Informatika, you can compare the effects of market volatilities on NFC Indonesia and Sentral Mitra 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 Sentral Mitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFC Indonesia and Sentral Mitra.

Diversification Opportunities for NFC Indonesia and Sentral Mitra

-0.33

Correlation Coefficient

NFC Indonesia  Sentral Mitra

Very good diversification

The 3 months correlation between NFC and Sentral is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Sentral Mitra Informatika in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentral Mitra Informatika 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 Sentral Mitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentral Mitra Informatika has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Sentral Mitra go up and down completely randomly.

Pair Corralation between NFC Indonesia and Sentral Mitra

Assuming the 90 days trading horizon NFC Indonesia PT is expected to generate 1.41 times more return on investment than Sentral Mitra. However, NFC Indonesia is 1.41 times more volatile than Sentral Mitra Informatika. It trades about 0.21 of its potential returns per unit of risk. Sentral Mitra Informatika is currently generating about -0.11 per unit of risk. If you would invest  107,000  in NFC Indonesia PT on December 30, 2024 and sell it today you would earn a total of  63,500  from holding NFC Indonesia PT or generate 59.35% return on investment over 90 days.

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

NFC Indonesia PT  vs.  Sentral Mitra Informatika

NFC Indonesia PT

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NFC Indonesia PT are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, NFC Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sentral Mitra Informatika

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentral Mitra Informatika 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.

Pair Trading with NFC Indonesia and Sentral Mitra

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

The idea behind NFC Indonesia PT and Sentral Mitra Informatika 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.