Correlation Between PT Indosat and SK Telecom

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

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

Diversification Opportunities for PT Indosat and SK Telecom

0.75

Correlation Coefficient

PT Indosat  SK Telecom

Poor diversification

The 3 months correlation between PTITF and SKM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom and PT Indosat 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 PT Indosat Tbk are associated (or correlated) with SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom has no effect on the direction of PT Indosat i.e., PT Indosat and SK Telecom go up and down completely randomly.

Pair Corralation between PT Indosat and SK Telecom

Assuming the 90 days horizon PT Indosat Tbk is expected to generate 67.66 times more return on investment than SK Telecom. However, PT Indosat is 67.66 times more volatile than SK Telecom Co. It trades about 0.17 of its potential returns per unit of risk. SK Telecom Co is currently generating about 0.04 per unit of risk. 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 Together
Strength	Significant
Accuracy	54.29%
Values	Daily Returns

PT Indosat Tbk  vs.  SK Telecom Co

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.

SK Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with PT Indosat and SK Telecom

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

The idea behind PT Indosat Tbk and SK Telecom Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.