Correlation Between Stepstone and Telkom Indonesia

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

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

Diversification Opportunities for Stepstone and Telkom Indonesia

-0.84

Correlation Coefficient

Stepstone  Telkom Indonesia

Pay attention - limited upside

The 3 months correlation between Stepstone and Telkom is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group 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 Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Stepstone and Telkom Indonesia

Given the investment horizon of 90 days Stepstone Group is expected to generate 1.28 times more return on investment than Telkom Indonesia. However, Stepstone is 1.28 times more volatile than Telkom Indonesia Tbk. It trades about 0.16 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.12 per unit of risk. If you would invest  5,359  in Stepstone Group on September 3, 2024 and sell it today you would earn a total of  1,230  from holding Stepstone Group or generate 22.95% return on investment over 90 days.

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

Stepstone Group  vs.  Telkom Indonesia Tbk

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone 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. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Stepstone and Telkom Indonesia

The main advantage of trading using opposite Stepstone and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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 Stepstone Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.