Correlation Between Telkom Indonesia and Smart Share

Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Smart Share 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 Telkom Indonesia and Smart Share into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telkom Indonesia Tbk and Smart Share Global, you can compare the effects of market volatilities on Telkom Indonesia and Smart Share 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 Telkom Indonesia with a short position of Smart Share. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Smart Share.

Diversification Opportunities for Telkom Indonesia and Smart Share

-0.46

Correlation Coefficient

Telkom Indonesia  Smart Share

Very good diversification

The 3 months correlation between Telkom and Smart is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global and Telkom Indonesia 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 Telkom Indonesia Tbk are associated (or correlated) with Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Smart Share go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Smart Share

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Smart Share. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 2.47 times less risky than Smart Share. The stock trades about -0.04 of its potential returns per unit of risk. The Smart Share Global is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Smart Share Global on November 28, 2024 and sell it today you would earn a total of  40.00  from holding Smart Share Global or generate 54.79% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Smart Share Global

Telkom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

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

Smart Share Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Smart Share

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

The idea behind Telkom Indonesia Tbk and Smart Share Global 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.