Correlation Between Telkom Indonesia and GuocoLand

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

Diversification Opportunities for Telkom Indonesia and GuocoLand

0.14

Correlation Coefficient

Telkom Indonesia  GuocoLand

Average diversification

The 3 months correlation between Telkom and GuocoLand is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and GuocoLand Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuocoLand Limited 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 GuocoLand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuocoLand Limited has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and GuocoLand go up and down completely randomly.

Pair Corralation between Telkom Indonesia and GuocoLand

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 21.17 times more return on investment than GuocoLand. However, Telkom Indonesia is 21.17 times more volatile than GuocoLand Limited. It trades about 0.01 of its potential returns per unit of risk. GuocoLand Limited is currently generating about -0.07 per unit of risk. If you would invest  17.00  in Telkom Indonesia Tbk on December 1, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  GuocoLand Limited

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 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GuocoLand Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GuocoLand Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GuocoLand 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 GuocoLand

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

The idea behind Telkom Indonesia Tbk and GuocoLand Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.