Correlation Between NFC Indonesia and Hensel Davest

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

Diversification Opportunities for NFC Indonesia and Hensel Davest

0.13

Correlation Coefficient

NFC Indonesia  Hensel Davest

Average diversification

The 3 months correlation between NFC and Hensel is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Hensel Davest Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensel Davest 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 Hensel Davest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensel Davest Indonesia has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Hensel Davest go up and down completely randomly.

Pair Corralation between NFC Indonesia and Hensel Davest

Assuming the 90 days trading horizon NFC Indonesia PT is expected to under-perform the Hensel Davest. But the stock apears to be less risky and, when comparing its historical volatility, NFC Indonesia PT is 1.03 times less risky than Hensel Davest. The stock trades about -0.11 of its potential returns per unit of risk. The Hensel Davest Indonesia is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,500  in Hensel Davest Indonesia on September 4, 2024 and sell it today you would lose (100.00) from holding Hensel Davest Indonesia or give up 6.67% of portfolio value over 90 days.

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

NFC Indonesia PT  vs.  Hensel Davest Indonesia

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.

Hensel Davest Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind NFC Indonesia PT and Hensel Davest 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.