Correlation Between Smartfren Telecom and Ace Hardware

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

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

Diversification Opportunities for Smartfren Telecom and Ace Hardware

-0.44

Correlation Coefficient

Smartfren Telecom  Ace Hardware

Very good diversification

The 3 months correlation between Smartfren and Ace is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Smartfren Telecom Tbk and Ace Hardware Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ace Hardware Indonesia and Smartfren Telecom 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 Smartfren Telecom Tbk are associated (or correlated) with Ace Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ace Hardware Indonesia has no effect on the direction of Smartfren Telecom i.e., Smartfren Telecom and Ace Hardware go up and down completely randomly.

Pair Corralation between Smartfren Telecom and Ace Hardware

Assuming the 90 days trading horizon Smartfren Telecom Tbk is expected to under-perform the Ace Hardware. In addition to that, Smartfren Telecom is 1.36 times more volatile than Ace Hardware Indonesia. It trades about -0.06 of its total potential returns per unit of risk. Ace Hardware Indonesia is currently generating about 0.05 per unit of volatility. If you would invest  72,000  in Ace Hardware Indonesia on September 3, 2024 and sell it today you would earn a total of  5,000  from holding Ace Hardware Indonesia or generate 6.94% return on investment over 90 days.

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

Smartfren Telecom Tbk  vs.  Ace Hardware Indonesia

Smartfren Telecom Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smartfren Telecom Tbk 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.

Ace Hardware Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ace Hardware may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smartfren Telecom and Ace Hardware

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

The idea behind Smartfren Telecom Tbk and Ace Hardware Indonesia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.