Correlation Between Alphabet and Telkom Indonesia

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

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

Diversification Opportunities for Alphabet and Telkom Indonesia

-0.63

Correlation Coefficient

Alphabet  Telkom Indonesia

Excellent diversification

The 3 months correlation between Alphabet and Telkom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Alphabet and Telkom Indonesia

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.38 times more return on investment than Telkom Indonesia. However, Alphabet Inc Class C is 2.61 times less risky than Telkom Indonesia. It trades about 0.14 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.0 per unit of risk. If you would invest  16,700  in Alphabet Inc Class C on September 30, 2024 and sell it today you would earn a total of  2,704  from holding Alphabet Inc Class C or generate 16.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Alphabet Inc Class C  vs.  Telkom Indonesia Tbk

Alphabet Class C

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alphabet and Telkom Indonesia

The main advantage of trading using opposite Alphabet and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.