Correlation Between Royal Prima and NFC Indonesia
Can any of the company-specific risk be diversified away by investing in both Royal Prima and NFC Indonesia 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 Royal Prima and NFC Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Prima PT and NFC Indonesia PT, you can compare the effects of market volatilities on Royal Prima and NFC Indonesia 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 Royal Prima with a short position of NFC Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Prima and NFC Indonesia.
Diversification Opportunities for Royal Prima and NFC Indonesia
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Royal and NFC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Royal Prima PT and NFC Indonesia PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFC Indonesia PT and Royal Prima 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 Royal Prima PT are associated (or correlated) with NFC Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFC Indonesia PT has no effect on the direction of Royal Prima i.e., Royal Prima and NFC Indonesia go up and down completely randomly.
Pair Corralation between Royal Prima and NFC Indonesia
Assuming the 90 days trading horizon Royal Prima is expected to generate 8.88 times less return on investment than NFC Indonesia. But when comparing it to its historical volatility, Royal Prima PT is 1.83 times less risky than NFC Indonesia. It trades about 0.03 of its potential returns per unit of risk. NFC Indonesia PT is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 114,500 in NFC Indonesia PT on November 3, 2024 and sell it today you would earn a total of 24,500 from holding NFC Indonesia PT or generate 21.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.37% |
| Values | Daily Returns |
Royal Prima PT vs. NFC Indonesia PT
Performance |
| Timeline |
| Royal Prima PT |
| NFC Indonesia PT |
Royal Prima and NFC Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Prima and NFC Indonesia
The main advantage of trading using opposite Royal Prima and NFC Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Prima position performs unexpectedly, NFC Indonesia 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 NFC Indonesia will offset losses from the drop in NFC Indonesia's long position.| Royal Prima vs. Medikaloka Hermina PT | Royal Prima vs. Sejahteraraya Anugrahjaya Tbk | Royal Prima vs. Prodia Widyahusada Tbk | Royal Prima vs. Sarana Meditama Metropolitan |
| NFC Indonesia vs. M Cash Integrasi | NFC Indonesia vs. Nusantara Voucher Distribution | NFC Indonesia vs. Digital Mediatama Maxima | NFC Indonesia vs. Multipolar Technology Tbk |
Check out your portfolio center.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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