Correlation Between NFC Indonesia and Arkadia Digital

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

Diversification Opportunities for NFC Indonesia and Arkadia Digital

0.28

Correlation Coefficient

NFC Indonesia  Arkadia Digital

Modest diversification

The 3 months correlation between NFC and Arkadia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NFC Indonesia PT and Arkadia Digital Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkadia Digital Media 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 Arkadia Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkadia Digital Media has no effect on the direction of NFC Indonesia i.e., NFC Indonesia and Arkadia Digital go up and down completely randomly.

Pair Corralation between NFC Indonesia and Arkadia Digital

Assuming the 90 days trading horizon NFC Indonesia PT is expected to under-perform the Arkadia Digital. In addition to that, NFC Indonesia is 1.64 times more volatile than Arkadia Digital Media. It trades about 0.0 of its total potential returns per unit of risk. Arkadia Digital Media is currently generating about 0.02 per unit of volatility. If you would invest  1,200  in Arkadia Digital Media on February 2, 2024 and sell it today you would earn a total of  0.00  from holding Arkadia Digital Media or generate 0.0% return on investment over 90 days.

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

NFC Indonesia PT  vs.  Arkadia Digital Media

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 basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arkadia Digital Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkadia Digital Media 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 basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with NFC Indonesia and Arkadia Digital

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

The idea behind NFC Indonesia PT and Arkadia Digital Media 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.