Correlation Between KDDI Corp and PT Indosat

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

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

Diversification Opportunities for KDDI Corp and PT Indosat

-0.13

Correlation Coefficient

KDDI Corp  PT Indosat

Good diversification

The 3 months correlation between KDDI and PTITF is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding KDDI Corp and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk and KDDI Corp 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 KDDI Corp are associated (or correlated) with PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of KDDI Corp i.e., KDDI Corp and PT Indosat go up and down completely randomly.

Pair Corralation between KDDI Corp and PT Indosat

Assuming the 90 days horizon KDDI Corp is expected to generate 95.32 times less return on investment than PT Indosat. But when comparing it to its historical volatility, KDDI Corp is 21.95 times less risky than PT Indosat. It trades about 0.04 of its potential returns per unit of risk. PT Indosat Tbk is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  49.00  in PT Indosat Tbk on October 5, 2024 and sell it today you would lose (33.00) from holding PT Indosat Tbk or give up 67.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.3%
Values	Daily Returns

KDDI Corp  vs.  PT Indosat Tbk

KDDI Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KDDI Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, KDDI Corp reported solid returns over the last few months and may actually be approaching a breakup point.

PT Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KDDI Corp and PT Indosat

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

The idea behind KDDI Corp and PT Indosat 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.