Correlation Between Smartfren Telecom and PT Homeco

Can any of the company-specific risk be diversified away by investing in both Smartfren Telecom and PT Homeco 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 PT Homeco 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 PT Homeco Victoria, you can compare the effects of market volatilities on Smartfren Telecom and PT Homeco 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 PT Homeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smartfren Telecom and PT Homeco.

Diversification Opportunities for Smartfren Telecom and PT Homeco

0.01

Correlation Coefficient

Smartfren Telecom  PT Homeco

Significant diversification

The 3 months correlation between Smartfren and LIVE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Smartfren Telecom Tbk and PT Homeco Victoria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Homeco Victoria 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 PT Homeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Homeco Victoria has no effect on the direction of Smartfren Telecom i.e., Smartfren Telecom and PT Homeco go up and down completely randomly.

Pair Corralation between Smartfren Telecom and PT Homeco

Assuming the 90 days trading horizon Smartfren Telecom Tbk is expected to generate 0.34 times more return on investment than PT Homeco. However, Smartfren Telecom Tbk is 2.97 times less risky than PT Homeco. It trades about 0.07 of its potential returns per unit of risk. PT Homeco Victoria is currently generating about -0.01 per unit of risk. If you would invest  2,200  in Smartfren Telecom Tbk on December 31, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Smartfren Telecom Tbk  vs.  PT Homeco Victoria

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 May 2025.

PT Homeco Victoria

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Smartfren Telecom and PT Homeco

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

The idea behind Smartfren Telecom Tbk and PT Homeco Victoria 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.