Correlation Between Aluminumof China and Telkom Indonesia

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

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

Diversification Opportunities for Aluminumof China and Telkom Indonesia

0.37

Correlation Coefficient

Aluminumof China  Telkom Indonesia

Weak diversification

The 3 months correlation between Aluminumof and Telkom is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of 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 Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Aluminumof China and Telkom Indonesia

Assuming the 90 days horizon Aluminum of is expected to generate 2.28 times more return on investment than Telkom Indonesia. However, Aluminumof China is 2.28 times more volatile than Telkom Indonesia Tbk. It trades about 0.05 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.04 per unit of risk. If you would invest  29.00  in Aluminum of on September 28, 2024 and sell it today you would earn a total of  24.00  from holding Aluminum of or generate 82.76% return on investment over 90 days.

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

Aluminum of  vs.  Telkom Indonesia Tbk

Aluminumof China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aluminumof China and Telkom Indonesia

The main advantage of trading using opposite Aluminumof China and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.