Correlation Between Nusa Palapa and Ulima Nitra

Can any of the company-specific risk be diversified away by investing in both Nusa Palapa and Ulima Nitra 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 Nusa Palapa and Ulima Nitra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nusa Palapa Gemilang and Ulima Nitra PT, you can compare the effects of market volatilities on Nusa Palapa and Ulima Nitra 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 Nusa Palapa with a short position of Ulima Nitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nusa Palapa and Ulima Nitra.

Diversification Opportunities for Nusa Palapa and Ulima Nitra

-0.69

Correlation Coefficient

Nusa Palapa  Ulima Nitra

Excellent diversification

The 3 months correlation between Nusa and Ulima is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nusa Palapa Gemilang and Ulima Nitra PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulima Nitra PT and Nusa Palapa 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 Nusa Palapa Gemilang are associated (or correlated) with Ulima Nitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ulima Nitra PT has no effect on the direction of Nusa Palapa i.e., Nusa Palapa and Ulima Nitra go up and down completely randomly.

Pair Corralation between Nusa Palapa and Ulima Nitra

Assuming the 90 days trading horizon Nusa Palapa Gemilang is expected to under-perform the Ulima Nitra. In addition to that, Nusa Palapa is 1.08 times more volatile than Ulima Nitra PT. It trades about -0.01 of its total potential returns per unit of risk. Ulima Nitra PT is currently generating about 0.17 per unit of volatility. If you would invest  43,800  in Ulima Nitra PT on December 29, 2024 and sell it today you would earn a total of  12,200  from holding Ulima Nitra PT or generate 27.85% return on investment over 90 days.

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

Nusa Palapa Gemilang  vs.  Ulima Nitra PT

Nusa Palapa Gemilang

Risk-Adjusted Performance

Very Weak

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

Ulima Nitra PT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ulima Nitra PT are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ulima Nitra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nusa Palapa and Ulima Nitra

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

The idea behind Nusa Palapa Gemilang and Ulima Nitra PT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.