Correlation Between NFC Indonesia and Mitra Pinasthika

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

Diversification Opportunities for NFC Indonesia and Mitra Pinasthika

-0.03

Correlation Coefficient

NFC Indonesia  Mitra Pinasthika

Good diversification

The 3 months correlation between NFC and Mitra is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Mitra Pinasthika Mustika in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitra Pinasthika Mustika 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 Mitra Pinasthika. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitra Pinasthika Mustika has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Mitra Pinasthika go up and down completely randomly.

Pair Corralation between NFC Indonesia and Mitra Pinasthika

Assuming the 90 days trading horizon NFC Indonesia PT is expected to under-perform the Mitra Pinasthika. In addition to that, NFC Indonesia is 8.24 times more volatile than Mitra Pinasthika Mustika. It trades about -0.2 of its total potential returns per unit of risk. Mitra Pinasthika Mustika is currently generating about -0.22 per unit of volatility. If you would invest  100,500  in Mitra Pinasthika Mustika on September 4, 2024 and sell it today you would lose (2,000) from holding Mitra Pinasthika Mustika or give up 1.99% of portfolio value over 90 days.

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

NFC Indonesia PT  vs.  Mitra Pinasthika Mustika

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.

Mitra Pinasthika Mustika

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitra Pinasthika Mustika has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mitra Pinasthika is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NFC Indonesia and Mitra Pinasthika

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

The idea behind NFC Indonesia PT and Mitra Pinasthika Mustika 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.