Correlation Between KINGBOARD CHEMICAL and Telkom Indonesia

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

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

Diversification Opportunities for KINGBOARD CHEMICAL and Telkom Indonesia

-0.38

Correlation Coefficient

KINGBOARD CHEMICAL  Telkom Indonesia

Very good diversification

The 3 months correlation between KINGBOARD and Telkom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and Telkom Indonesia go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and Telkom Indonesia

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 0.48 times more return on investment than Telkom Indonesia. However, KINGBOARD CHEMICAL is 2.08 times less risky than Telkom Indonesia. It trades about 0.2 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  190.00  in KINGBOARD CHEMICAL on December 1, 2024 and sell it today you would earn a total of  96.00  from holding KINGBOARD CHEMICAL or generate 50.53% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  Telkom Indonesia Tbk

KINGBOARD CHEMICAL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KINGBOARD CHEMICAL are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KINGBOARD CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

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. In spite of comparatively uncertain basic indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KINGBOARD CHEMICAL and Telkom Indonesia

The main advantage of trading using opposite KINGBOARD CHEMICAL and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.