Correlation Between MNC Vision and Smartfren Telecom

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

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

Diversification Opportunities for MNC Vision and Smartfren Telecom

0.66

Correlation Coefficient

MNC Vision  Smartfren Telecom

Poor diversification

The 3 months correlation between MNC and Smartfren is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MNC Vision Networks 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 MNC Vision 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 MNC Vision Networks 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 MNC Vision i.e., MNC Vision and Smartfren Telecom go up and down completely randomly.

Pair Corralation between MNC Vision and Smartfren Telecom

Assuming the 90 days trading horizon MNC Vision Networks is expected to generate 1.16 times more return on investment than Smartfren Telecom. However, MNC Vision is 1.16 times more volatile than Smartfren Telecom Tbk. It trades about -0.05 of its potential returns per unit of risk. Smartfren Telecom Tbk is currently generating about -0.06 per unit of risk. If you would invest  2,200  in MNC Vision Networks on December 4, 2024 and sell it today you would lose (100.00) from holding MNC Vision Networks or give up 4.55% of portfolio value over 90 days.

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

MNC Vision Networks  vs.  Smartfren Telecom Tbk

MNC Vision Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days MNC Vision Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Smartfren Telecom Tbk

Risk-Adjusted Performance

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 latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with MNC Vision and Smartfren Telecom

The main advantage of trading using opposite MNC Vision and Smartfren Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MNC Vision 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 MNC Vision Networks 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.