Correlation Between Transportadora and Telkom Indonesia

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

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

Diversification Opportunities for Transportadora and Telkom Indonesia

-0.64

Correlation Coefficient

Transportadora  Telkom Indonesia

Excellent diversification

The 3 months correlation between Transportadora and Telkom is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Transportadora and Telkom Indonesia

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.25 times more return on investment than Telkom Indonesia. However, Transportadora is 1.25 times more volatile than Telkom Indonesia Tbk. It trades about 0.18 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.04 per unit of risk. If you would invest  1,740  in Transportadora de Gas on October 5, 2024 and sell it today you would earn a total of  960.00  from holding Transportadora de Gas or generate 55.17% return on investment over 90 days.

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

Transportadora de Gas  vs.  Telkom Indonesia Tbk

Transportadora de Gas

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain forward-looking signals, Transportadora 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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Transportadora and Telkom Indonesia

The main advantage of trading using opposite Transportadora and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.