Correlation Between NFC Indonesia and M Cash

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

Diversification Opportunities for NFC Indonesia and M Cash

0.34

Correlation Coefficient

NFC Indonesia  M Cash

Weak diversification

The 3 months correlation between NFC and MCAS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and M Cash Integrasi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Cash Integrasi 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 M Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Cash Integrasi has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and M Cash go up and down completely randomly.

Pair Corralation between NFC Indonesia and M Cash

Assuming the 90 days trading horizon NFC Indonesia is expected to generate 3.67 times less return on investment than M Cash. In addition to that, NFC Indonesia is 1.25 times more volatile than M Cash Integrasi. It trades about 0.13 of its total potential returns per unit of risk. M Cash Integrasi is currently generating about 0.58 per unit of volatility. If you would invest  99,000  in M Cash Integrasi on November 27, 2024 and sell it today you would earn a total of  41,000  from holding M Cash Integrasi or generate 41.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

NFC Indonesia PT  vs.  M Cash Integrasi

NFC Indonesia PT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NFC Indonesia PT are ranked lower than 5 (%) 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.

M Cash Integrasi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Cash Integrasi are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, M Cash disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFC Indonesia and M Cash

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

The idea behind NFC Indonesia PT and M Cash Integrasi 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.