Correlation Between Krakatau Steel and Smartfren Telecom
Can any of the company-specific risk be diversified away by investing in both Krakatau Steel and Smartfren 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 Krakatau Steel and Smartfren Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Krakatau Steel Persero and Smartfren Telecom Tbk, you can compare the effects of market volatilities on Krakatau Steel and Smartfren 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 Krakatau Steel with a short position of Smartfren Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krakatau Steel and Smartfren Telecom.
Diversification Opportunities for Krakatau Steel and Smartfren Telecom
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Krakatau and Smartfren is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Krakatau Steel Persero and Smartfren Telecom Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smartfren Telecom Tbk and Krakatau Steel 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 Krakatau Steel Persero are associated (or correlated) with Smartfren Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smartfren Telecom Tbk has no effect on the direction of Krakatau Steel i.e., Krakatau Steel and Smartfren Telecom go up and down completely randomly.
Pair Corralation between Krakatau Steel and Smartfren Telecom
Assuming the 90 days trading horizon Krakatau Steel Persero is expected to under-perform the Smartfren Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Krakatau Steel Persero is 1.51 times less risky than Smartfren Telecom. The stock trades about -0.28 of its potential returns per unit of risk. The Smartfren Telecom Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,300 in Smartfren Telecom Tbk on November 18, 2024 and sell it today you would earn a total of 0.00 from holding Smartfren Telecom Tbk or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Krakatau Steel Persero vs. Smartfren Telecom Tbk
Performance |
| Timeline |
| Krakatau Steel Persero |
| Smartfren Telecom Tbk |
Krakatau Steel and Smartfren Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Krakatau Steel and Smartfren Telecom
The main advantage of trading using opposite Krakatau Steel and Smartfren Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krakatau Steel position performs unexpectedly, Smartfren 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 Smartfren Telecom will offset losses from the drop in Smartfren Telecom's long position.| Krakatau Steel vs. Timah Persero Tbk | Krakatau Steel vs. Garuda Indonesia Persero | Krakatau Steel vs. Jasa Marga Tbk | Krakatau Steel vs. Semen Indonesia Persero |
| Smartfren Telecom vs. Indosat Tbk | Smartfren Telecom vs. XL Axiata Tbk | Smartfren Telecom vs. Energi Mega Persada | Smartfren Telecom vs. Bakrie Brothers Tbk |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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