Correlation Between ANGANG STEEL and Telkom Indonesia

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

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

Diversification Opportunities for ANGANG STEEL and Telkom Indonesia

-0.09

Correlation Coefficient

ANGANG STEEL  Telkom Indonesia

Good diversification

The 3 months correlation between ANGANG and Telkom is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ANGANG STEEL H 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 ANGANG STEEL 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 ANGANG STEEL H 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 ANGANG STEEL i.e., ANGANG STEEL and Telkom Indonesia go up and down completely randomly.

Pair Corralation between ANGANG STEEL and Telkom Indonesia

Assuming the 90 days trading horizon ANGANG STEEL is expected to generate 3.68 times less return on investment than Telkom Indonesia. But when comparing it to its historical volatility, ANGANG STEEL H is 2.3 times less risky than Telkom Indonesia. It trades about 0.02 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Telkom Indonesia Tbk on October 10, 2024 and sell it today you would lose (1.00) from holding Telkom Indonesia Tbk or give up 6.25% of portfolio value over 90 days.

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

ANGANG STEEL H   vs.  Telkom Indonesia Tbk

ANGANG STEEL H

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ANGANG STEEL H are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ANGANG STEEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Telkom Indonesia Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANGANG STEEL and Telkom Indonesia

The main advantage of trading using opposite ANGANG STEEL and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGANG STEEL 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 ANGANG STEEL H 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .