Correlation Between Liberty Global and Telkom Indonesia

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

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

Diversification Opportunities for Liberty Global and Telkom Indonesia

-0.07

Correlation Coefficient

Liberty Global  Telkom Indonesia

Good diversification

The 3 months correlation between Liberty and Telkom is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Global PLC 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 Liberty Global 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 Liberty Global PLC 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 Liberty Global i.e., Liberty Global and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Liberty Global and Telkom Indonesia

Assuming the 90 days horizon Liberty Global PLC is expected to generate 5.2 times more return on investment than Telkom Indonesia. However, Liberty Global is 5.2 times more volatile than Telkom Indonesia Tbk. It trades about 0.04 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.06 per unit of risk. If you would invest  1,253  in Liberty Global PLC on December 29, 2024 and sell it today you would lose (110.00) from holding Liberty Global PLC or give up 8.78% of portfolio value over 90 days.

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

Liberty Global PLC  vs.  Telkom Indonesia Tbk

Liberty Global PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Global PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Liberty Global and Telkom Indonesia

The main advantage of trading using opposite Liberty Global and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Global 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 Liberty Global PLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.