Correlation Between Telkom Indonesia and Sumitomo Mitsui

Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui Trust, you can compare the effects of market volatilities on Telkom Indonesia and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Sumitomo Mitsui.

Diversification Opportunities for Telkom Indonesia and Sumitomo Mitsui

-0.33

Correlation Coefficient

Telkom Indonesia  Sumitomo Mitsui

Very good diversification

The 3 months correlation between Telkom and Sumitomo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Trust has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Sumitomo Mitsui

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the Sumitomo Mitsui. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.17 times less risky than Sumitomo Mitsui. The pink sheet trades about -0.31 of its potential returns per unit of risk. The Sumitomo Mitsui Trust is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Sumitomo Mitsui Trust on September 25, 2024 and sell it today you would earn a total of  340.00  from holding Sumitomo Mitsui Trust or generate 15.25% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Sumitomo Mitsui Trust

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Mitsui Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Sumitomo Mitsui

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

The idea behind Telkom Indonesia Tbk and Sumitomo Mitsui Trust 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.