Correlation Between Tower Bersama and Smartfren Telecom

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

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

Diversification Opportunities for Tower Bersama and Smartfren Telecom

-0.78

Correlation Coefficient

Tower Bersama  Smartfren Telecom

Pay attention - limited upside

The 3 months correlation between Tower and Smartfren is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tower Bersama Infrastructure 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 Tower Bersama 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 Tower Bersama Infrastructure 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 Tower Bersama i.e., Tower Bersama and Smartfren Telecom go up and down completely randomly.

Pair Corralation between Tower Bersama and Smartfren Telecom

Assuming the 90 days trading horizon Tower Bersama Infrastructure is expected to generate 0.62 times more return on investment than Smartfren Telecom. However, Tower Bersama Infrastructure is 1.6 times less risky than Smartfren Telecom. It trades about 0.21 of its potential returns per unit of risk. Smartfren Telecom Tbk is currently generating about -0.19 per unit of risk. If you would invest  194,481  in Tower Bersama Infrastructure on October 1, 2024 and sell it today you would earn a total of  15,519  from holding Tower Bersama Infrastructure or generate 7.98% return on investment over 90 days.

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

Tower Bersama Infrastructure  vs.  Smartfren Telecom Tbk

Tower Bersama Infras

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Bersama Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tower Bersama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Tower Bersama and Smartfren Telecom

The main advantage of trading using opposite Tower Bersama and Smartfren Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Bersama 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 Tower Bersama Infrastructure 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.