Correlation Between SOFI TECHNOLOGIES and Telkom Indonesia

Can any of the company-specific risk be diversified away by investing in both SOFI TECHNOLOGIES and Telkom Indonesia 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 SOFI TECHNOLOGIES and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SOFI TECHNOLOGIES and Telkom Indonesia

0.76

Correlation Coefficient

SOFI TECHNOLOGIES  Telkom Indonesia

Poor diversification

The 3 months correlation between SOFI and Telkom is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and Telkom Indonesia go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and Telkom Indonesia

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, SOFI TECHNOLOGIES is 1.01 times less risky than Telkom Indonesia. The stock trades about -0.1 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Telkom Indonesia Tbk on December 20, 2024 and sell it today you would lose (2.00) from holding Telkom Indonesia Tbk or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

SOFI TECHNOLOGIES  vs.  Telkom Indonesia Tbk

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOFI TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SOFI TECHNOLOGIES and Telkom Indonesia

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

The idea behind SOFI TECHNOLOGIES and Telkom Indonesia 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.