Correlation Between Merdeka Copper and Smartfren Telecom

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

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

Diversification Opportunities for Merdeka Copper and Smartfren Telecom

0.71

Correlation Coefficient

Merdeka Copper  Smartfren Telecom

Poor diversification

The 3 months correlation between Merdeka and Smartfren is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold 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 Merdeka Copper 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 Merdeka Copper Gold 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 Merdeka Copper i.e., Merdeka Copper and Smartfren Telecom go up and down completely randomly.

Pair Corralation between Merdeka Copper and Smartfren Telecom

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to under-perform the Smartfren Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Merdeka Copper Gold is 1.12 times less risky than Smartfren Telecom. The stock trades about -0.44 of its potential returns per unit of risk. The Smartfren Telecom Tbk is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Smartfren Telecom Tbk on September 22, 2024 and sell it today you would lose (200.00) from holding Smartfren Telecom Tbk or give up 8.0% of portfolio value over 90 days.

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

Merdeka Copper Gold  vs.  Smartfren Telecom Tbk

Merdeka Copper Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merdeka Copper Gold 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.

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 quite persistent forward-looking signals, Smartfren Telecom is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Merdeka Copper and Smartfren Telecom

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

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.