Correlation Between THAI BEVERAGE and Telkom Indonesia

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

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

Diversification Opportunities for THAI BEVERAGE and Telkom Indonesia

0.45

Correlation Coefficient

THAI BEVERAGE  Telkom Indonesia

Very weak diversification

The 3 months correlation between THAI and Telkom is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE 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 THAI BEVERAGE 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 THAI BEVERAGE 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 THAI BEVERAGE i.e., THAI BEVERAGE and Telkom Indonesia go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Telkom Indonesia

Assuming the 90 days trading horizon THAI BEVERAGE is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, THAI BEVERAGE is 3.48 times less risky than Telkom Indonesia. The stock trades about -0.03 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Telkom Indonesia Tbk on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Telkom Indonesia Tbk or generate 0.0% return on investment over 90 days.

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

THAI BEVERAGE  vs.  Telkom Indonesia Tbk

THAI BEVERAGE

Risk-Adjusted Performance

Very Weak

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telkom Indonesia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THAI BEVERAGE and Telkom Indonesia

The main advantage of trading using opposite THAI BEVERAGE and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE 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 THAI BEVERAGE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.