Correlation Between NFC Indonesia and Jakarta Int

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

Diversification Opportunities for NFC Indonesia and Jakarta Int

-0.09

Correlation Coefficient

NFC Indonesia  Jakarta Int

Good diversification

The 3 months correlation between NFC and Jakarta is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Jakarta Int Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Int Hotels 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 Jakarta Int. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Int Hotels has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Jakarta Int go up and down completely randomly.

Pair Corralation between NFC Indonesia and Jakarta Int

Assuming the 90 days trading horizon NFC Indonesia PT is expected to under-perform the Jakarta Int. But the stock apears to be less risky and, when comparing its historical volatility, NFC Indonesia PT is 1.92 times less risky than Jakarta Int. The stock trades about -0.14 of its potential returns per unit of risk. The Jakarta Int Hotels is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  33,400  in Jakarta Int Hotels on September 4, 2024 and sell it today you would earn a total of  167,600  from holding Jakarta Int Hotels or generate 501.8% return on investment over 90 days.

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

NFC Indonesia PT  vs.  Jakarta Int Hotels

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.

Jakarta Int Hotels

Risk-Adjusted Performance

28 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFC Indonesia and Jakarta Int

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

The idea behind NFC Indonesia PT and Jakarta Int Hotels 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.