Correlation Between Telkom Indonesia and SOFI TECHNOLOGIES

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

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

Diversification Opportunities for Telkom Indonesia and SOFI TECHNOLOGIES

-0.64

Correlation Coefficient

Telkom Indonesia  SOFI TECHNOLOGIES

Excellent diversification

The 3 months correlation between Telkom and SOFI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and Telkom Indonesia 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 Telkom Indonesia Tbk are associated (or correlated) with SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Telkom Indonesia and SOFI TECHNOLOGIES

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the SOFI TECHNOLOGIES. In addition to that, Telkom Indonesia is 1.44 times more volatile than SOFI TECHNOLOGIES. It trades about -0.05 of its total potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about -0.04 per unit of volatility. If you would invest  1,485  in SOFI TECHNOLOGIES on October 11, 2024 and sell it today you would lose (48.00) from holding SOFI TECHNOLOGIES or give up 3.23% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  SOFI TECHNOLOGIES

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 fragile 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.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and SOFI TECHNOLOGIES

The main advantage of trading using opposite Telkom Indonesia and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES will offset losses from the drop in SOFI TECHNOLOGIES's long position.

The idea behind Telkom Indonesia Tbk and SOFI TECHNOLOGIES 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.