Correlation Between Exploitasi Energi and Smartfren Telecom

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

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

Diversification Opportunities for Exploitasi Energi and Smartfren Telecom

-0.72

Correlation Coefficient

Exploitasi Energi  Smartfren Telecom

Pay attention - limited upside

The 3 months correlation between Exploitasi and Smartfren is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Exploitasi Energi Indonesia 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 Exploitasi Energi 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 Exploitasi Energi Indonesia 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 Exploitasi Energi i.e., Exploitasi Energi and Smartfren Telecom go up and down completely randomly.

Pair Corralation between Exploitasi Energi and Smartfren Telecom

Assuming the 90 days trading horizon Exploitasi Energi Indonesia is expected to generate 3.06 times more return on investment than Smartfren Telecom. However, Exploitasi Energi is 3.06 times more volatile than Smartfren Telecom Tbk. It trades about 0.25 of its potential returns per unit of risk. Smartfren Telecom Tbk is currently generating about -0.07 per unit of risk. If you would invest  600.00  in Exploitasi Energi Indonesia on September 28, 2024 and sell it today you would earn a total of  1,300  from holding Exploitasi Energi Indonesia or generate 216.67% return on investment over 90 days.

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

Exploitasi Energi Indonesia  vs.  Smartfren Telecom Tbk

Exploitasi Energi

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exploitasi Energi Indonesia are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Exploitasi Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Smartfren Telecom Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smartfren Telecom Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Exploitasi Energi and Smartfren Telecom

The main advantage of trading using opposite Exploitasi Energi and Smartfren Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exploitasi Energi 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.

The idea behind Exploitasi Energi Indonesia and Smartfren Telecom 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.