Correlation Between Centratama Telekomunikasi and Fortune Indonesia

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

By analyzing existing cross correlation between Centratama Telekomunikasi Ind and Fortune Indonesia Tbk, you can compare the effects of market volatilities on Centratama Telekomunikasi and Fortune 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 Centratama Telekomunikasi with a short position of Fortune Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centratama Telekomunikasi and Fortune Indonesia.

Diversification Opportunities for Centratama Telekomunikasi and Fortune Indonesia

-0.22

Correlation Coefficient

Centratama Telekomunikasi  Fortune Indonesia

Very good diversification

The 3 months correlation between Centratama and Fortune is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Centratama Telekomunikasi Ind and Fortune Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Indonesia Tbk and Centratama Telekomunikasi 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 Centratama Telekomunikasi Ind are associated (or correlated) with Fortune Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Indonesia Tbk has no effect on the direction of Centratama Telekomunikasi i.e., Centratama Telekomunikasi and Fortune Indonesia go up and down completely randomly.

Pair Corralation between Centratama Telekomunikasi and Fortune Indonesia

Assuming the 90 days trading horizon Centratama Telekomunikasi Ind is expected to under-perform the Fortune Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Centratama Telekomunikasi Ind is 2.52 times less risky than Fortune Indonesia. The stock trades about -0.01 of its potential returns per unit of risk. The Fortune Indonesia Tbk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  440,000  in Fortune Indonesia Tbk on September 13, 2024 and sell it today you would earn a total of  3,000  from holding Fortune Indonesia Tbk or generate 0.68% return on investment over 90 days.

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

Centratama Telekomunikasi Ind  vs.  Fortune Indonesia Tbk

Centratama Telekomunikasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centratama Telekomunikasi Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Centratama Telekomunikasi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fortune Indonesia Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Fortune Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centratama Telekomunikasi and Fortune Indonesia

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

The idea behind Centratama Telekomunikasi Ind and Fortune Indonesia 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.