Correlation Between NFC Indonesia and Tourindo Guide

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

Diversification Opportunities for NFC Indonesia and Tourindo Guide

-0.47

Correlation Coefficient

NFC Indonesia  Tourindo Guide

Very good diversification

The 3 months correlation between NFC and Tourindo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Tourindo Guide Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourindo Guide Indonesia 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 Tourindo Guide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourindo Guide Indonesia has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Tourindo Guide go up and down completely randomly.

Pair Corralation between NFC Indonesia and Tourindo Guide

Assuming the 90 days trading horizon NFC Indonesia PT is expected to generate 2.49 times more return on investment than Tourindo Guide. However, NFC Indonesia is 2.49 times more volatile than Tourindo Guide Indonesia. It trades about 0.06 of its potential returns per unit of risk. Tourindo Guide Indonesia is currently generating about -0.01 per unit of risk. If you would invest  106,000  in NFC Indonesia PT on October 25, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NFC Indonesia PT  vs.  Tourindo Guide Indonesia

NFC Indonesia PT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NFC Indonesia PT are ranked lower than 4 (%) 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.

Tourindo Guide Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tourindo Guide Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tourindo Guide 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 Tourindo Guide

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

The idea behind NFC Indonesia PT and Tourindo Guide Indonesia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.