Correlation Between Telkom Indonesia and Haier Smart

Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Haier Smart 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 Haier Smart 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 Haier Smart Home, you can compare the effects of market volatilities on Telkom Indonesia and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Haier Smart.

Diversification Opportunities for Telkom Indonesia and Haier Smart

-0.62

Correlation Coefficient

Telkom Indonesia  Haier Smart

Excellent diversification

The 3 months correlation between Telkom and Haier is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Haier Smart go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Haier Smart

Assuming the 90 days trading horizon Telkom Indonesia is expected to generate 1.11 times less return on investment than Haier Smart. In addition to that, Telkom Indonesia is 6.66 times more volatile than Haier Smart Home. It trades about 0.01 of its total potential returns per unit of risk. Haier Smart Home is currently generating about 0.05 per unit of volatility. If you would invest  180.00  in Haier Smart Home on December 30, 2024 and sell it today you would earn a total of  7.00  from holding Haier Smart Home or generate 3.89% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Haier Smart Home

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 nearly stable forward indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Haier Smart Home

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telkom Indonesia and Haier Smart

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

The idea behind Telkom Indonesia Tbk and Haier Smart Home 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.