Correlation Between Dupont De and NFC Indonesia

Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and NFC Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and NFC Indonesia PT, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of NFC Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and NFC Indonesia.

Diversification Opportunities for Dupont De and NFC Indonesia

-0.6

Correlation Coefficient

Dupont De  NFC Indonesia

Excellent diversification

The 3 months correlation between Dupont and NFC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and NFC Indonesia go up and down completely randomly.

Pair Corralation between Dupont De and NFC Indonesia

Allowing for the 90-day total investment horizon Dupont De is expected to generate 2.93 times less return on investment than NFC Indonesia. But when comparing it to its historical volatility, Dupont De Nemours is 4.48 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 0.02 of returns per unit of risk over similar time horizon. If you would invest  122,000  in NFC Indonesia PT on September 3, 2024 and sell it today you would lose (4,500) from holding NFC Indonesia PT or give up 3.69% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  NFC Indonesia PT

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Dupont De and NFC Indonesia

The main advantage of trading using opposite Dupont De and NFC Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours and NFC Indonesia 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.