Correlation Between Telkom Indonesia and COMMERCIAL VEHICLE

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

Diversification Opportunities for Telkom Indonesia and COMMERCIAL VEHICLE

0.69

Correlation Coefficient

Telkom Indonesia  COMMERCIAL VEHICLE

Poor diversification

The 3 months correlation between Telkom and COMMERCIAL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and COMMERCIAL VEHICLE go up and down completely randomly.

Pair Corralation between Telkom Indonesia and COMMERCIAL VEHICLE

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 1.69 times more return on investment than COMMERCIAL VEHICLE. However, Telkom Indonesia is 1.69 times more volatile than COMMERCIAL VEHICLE. It trades about 0.01 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.12 per unit of risk. If you would invest  19.00  in Telkom Indonesia Tbk on September 3, 2024 and sell it today you would lose (4.00) from holding Telkom Indonesia Tbk or give up 21.05% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  COMMERCIAL VEHICLE

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 latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telkom Indonesia and COMMERCIAL VEHICLE

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

The idea behind Telkom Indonesia Tbk and COMMERCIAL VEHICLE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.