Correlation Between Telkom Indonesia and Neste Oyj

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

Diversification Opportunities for Telkom Indonesia and Neste Oyj

0.67

Correlation Coefficient

Telkom Indonesia  Neste Oyj

Poor diversification

The 3 months correlation between Telkom and Neste is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Neste Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neste Oyj 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 Neste Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neste Oyj has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Neste Oyj go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Neste Oyj

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 2.36 times more return on investment than Neste Oyj. However, Telkom Indonesia is 2.36 times more volatile than Neste Oyj. It trades about -0.01 of its potential returns per unit of risk. Neste Oyj is currently generating about -0.07 per unit of risk. If you would invest  18.00  in Telkom Indonesia Tbk on September 13, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 16.67% 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.  Neste Oyj

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.

Neste Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neste Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Telkom Indonesia and Neste Oyj

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

The idea behind Telkom Indonesia Tbk and Neste Oyj 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.