Correlation Between Telkom Indonesia and MakeMyTrip

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

Diversification Opportunities for Telkom Indonesia and MakeMyTrip

-0.49

Correlation Coefficient

Telkom Indonesia  MakeMyTrip

Very good diversification

The 3 months correlation between Telkom and MakeMyTrip is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and MakeMyTrip Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MakeMyTrip 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 MakeMyTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MakeMyTrip Limited has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and MakeMyTrip go up and down completely randomly.

Pair Corralation between Telkom Indonesia and MakeMyTrip

Assuming the 90 days trading horizon Telkom Indonesia is expected to generate 3.93 times less return on investment than MakeMyTrip. In addition to that, Telkom Indonesia is 2.14 times more volatile than MakeMyTrip Limited. It trades about 0.01 of its total potential returns per unit of risk. MakeMyTrip Limited is currently generating about 0.12 per unit of volatility. If you would invest  2,540  in MakeMyTrip Limited on October 4, 2024 and sell it today you would earn a total of  8,325  from holding MakeMyTrip Limited or generate 327.76% 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.  MakeMyTrip Limited

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

MakeMyTrip Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MakeMyTrip Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MakeMyTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and MakeMyTrip

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

The idea behind Telkom Indonesia Tbk and MakeMyTrip 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.