Correlation Between Indosat Tbk and Sona Topas

Can any of the company-specific risk be diversified away by investing in both Indosat Tbk and Sona Topas 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 Indosat Tbk and Sona Topas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indosat Tbk and Sona Topas Tourism, you can compare the effects of market volatilities on Indosat Tbk and Sona Topas 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 Indosat Tbk with a short position of Sona Topas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indosat Tbk and Sona Topas.

Diversification Opportunities for Indosat Tbk and Sona Topas

-0.7

Correlation Coefficient

Indosat Tbk  Sona Topas

Excellent diversification

The 3 months correlation between Indosat and Sona is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Indosat Tbk and Sona Topas Tourism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sona Topas Tourism and Indosat Tbk 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 Indosat Tbk are associated (or correlated) with Sona Topas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sona Topas Tourism has no effect on the direction of Indosat Tbk i.e., Indosat Tbk and Sona Topas go up and down completely randomly.

Pair Corralation between Indosat Tbk and Sona Topas

Assuming the 90 days trading horizon Indosat Tbk is expected to under-perform the Sona Topas. But the stock apears to be less risky and, when comparing its historical volatility, Indosat Tbk is 1.08 times less risky than Sona Topas. The stock trades about -0.13 of its potential returns per unit of risk. The Sona Topas Tourism is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  130,500  in Sona Topas Tourism on September 5, 2024 and sell it today you would earn a total of  412,000  from holding Sona Topas Tourism or generate 315.71% return on investment over 90 days.

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

Indosat Tbk  vs.  Sona Topas Tourism

Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indosat 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.

Sona Topas Tourism

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indosat Tbk and Sona Topas

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

The idea behind Indosat Tbk and Sona Topas Tourism 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.