Correlation Between Telkom Indonesia and SPDR Gold

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

Diversification Opportunities for Telkom Indonesia and SPDR Gold

-0.41

Correlation Coefficient

Telkom Indonesia  SPDR Gold

Very good diversification

The 3 months correlation between Telkom and SPDR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares 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 SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and SPDR Gold go up and down completely randomly.

Pair Corralation between Telkom Indonesia and SPDR Gold

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 6.98 times more return on investment than SPDR Gold. However, Telkom Indonesia is 6.98 times more volatile than SPDR Gold Shares. It trades about 0.02 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.1 per unit of risk. If you would invest  21.00  in Telkom Indonesia Tbk on September 23, 2024 and sell it today you would lose (5.00) from holding Telkom Indonesia Tbk or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.61%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  SPDR Gold Shares

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

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 January 2025.

SPDR Gold Shares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SPDR Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telkom Indonesia and SPDR Gold

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

The idea behind Telkom Indonesia Tbk and SPDR Gold Shares 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.