Correlation Between FKS Food and Smartfren Telecom

Can any of the company-specific risk be diversified away by investing in both FKS Food and Smartfren Telecom 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 FKS Food and Smartfren Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FKS Food Sejahtera and Smartfren Telecom Tbk, you can compare the effects of market volatilities on FKS Food and Smartfren Telecom 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 FKS Food with a short position of Smartfren Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of FKS Food and Smartfren Telecom.

Diversification Opportunities for FKS Food and Smartfren Telecom

-0.17

Correlation Coefficient

FKS Food  Smartfren Telecom

Good diversification

The 3 months correlation between FKS and Smartfren is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding FKS Food Sejahtera and Smartfren Telecom Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smartfren Telecom Tbk and FKS Food 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 FKS Food Sejahtera are associated (or correlated) with Smartfren Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smartfren Telecom Tbk has no effect on the direction of FKS Food i.e., FKS Food and Smartfren Telecom go up and down completely randomly.

Pair Corralation between FKS Food and Smartfren Telecom

Assuming the 90 days trading horizon FKS Food is expected to generate 3.64 times less return on investment than Smartfren Telecom. But when comparing it to its historical volatility, FKS Food Sejahtera is 1.43 times less risky than Smartfren Telecom. It trades about 0.03 of its potential returns per unit of risk. Smartfren Telecom Tbk is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,200  in Smartfren Telecom Tbk on December 30, 2024 and sell it today you would earn a total of  200.00  from holding Smartfren Telecom Tbk or generate 9.09% return on investment over 90 days.

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

FKS Food Sejahtera  vs.  Smartfren Telecom Tbk

FKS Food Sejahtera

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FKS Food Sejahtera are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, FKS Food is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Smartfren Telecom Tbk

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smartfren Telecom Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Smartfren Telecom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FKS Food and Smartfren Telecom

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

The idea behind FKS Food Sejahtera and Smartfren Telecom Tbk 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.