Correlation Between China Mobile and Telkom Indonesia

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

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

Diversification Opportunities for China Mobile and Telkom Indonesia

-0.01

Correlation Coefficient

China Mobile  Telkom Indonesia

Good diversification

The 3 months correlation between China and Telkom is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited 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 China Mobile 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 China Mobile Limited 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 China Mobile i.e., China Mobile and Telkom Indonesia go up and down completely randomly.

Pair Corralation between China Mobile and Telkom Indonesia

Assuming the 90 days horizon China Mobile Limited is expected to generate 0.67 times more return on investment than Telkom Indonesia. However, China Mobile Limited is 1.5 times less risky than Telkom Indonesia. It trades about 0.1 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.02 per unit of risk. If you would invest  156.00  in China Mobile Limited on September 22, 2024 and sell it today you would earn a total of  700.00  from holding China Mobile Limited or generate 448.72% return on investment over 90 days.

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

China Mobile Limited  vs.  Telkom Indonesia Tbk

China Mobile Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Mobile and Telkom Indonesia

The main advantage of trading using opposite China Mobile and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile 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 China Mobile Limited 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.