Correlation Between DAIRY FARM and Telkom Indonesia

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

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

Diversification Opportunities for DAIRY FARM and Telkom Indonesia

-0.59

Correlation Coefficient

DAIRY FARM  Telkom Indonesia

Excellent diversification

The 3 months correlation between DAIRY and Telkom is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Telkom Indonesia go up and down completely randomly.

Pair Corralation between DAIRY FARM and Telkom Indonesia

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.62 times more return on investment than Telkom Indonesia. However, DAIRY FARM INTL is 1.62 times less risky than Telkom Indonesia. It trades about 0.01 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  223.00  in DAIRY FARM INTL on October 4, 2024 and sell it today you would lose (5.00) from holding DAIRY FARM INTL or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

DAIRY FARM INTL  vs.  Telkom Indonesia Tbk

DAIRY FARM INTL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 rather sound technical and fundamental indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DAIRY FARM and Telkom Indonesia

The main advantage of trading using opposite DAIRY FARM and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.