Correlation Between Telkom Indonesia and Heidelberg Materials

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

Diversification Opportunities for Telkom Indonesia and Heidelberg Materials

-0.58

Correlation Coefficient

Telkom Indonesia  Heidelberg Materials

Excellent diversification

The 3 months correlation between Telkom and Heidelberg is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Heidelberg Materials go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Heidelberg Materials

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 7.17 times more return on investment than Heidelberg Materials. However, Telkom Indonesia is 7.17 times more volatile than Heidelberg Materials AG. It trades about 0.05 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.01 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Telkom Indonesia Tbk or generate 0.0% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Heidelberg Materials AG

Telkom Indonesia Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Heidelberg Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Heidelberg Materials exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Heidelberg Materials

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

The idea behind Telkom Indonesia Tbk and Heidelberg Materials AG 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.