Correlation Between Telkom Indonesia and Reliance Industries

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

Diversification Opportunities for Telkom Indonesia and Reliance Industries

0.4

Correlation Coefficient

Telkom Indonesia  Reliance Industries

Very weak diversification

The 3 months correlation between Telkom and Reliance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries 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 Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Reliance Industries go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Reliance Industries

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 5.0 times more return on investment than Reliance Industries. However, Telkom Indonesia is 5.0 times more volatile than Reliance Industries Limited. It trades about 0.01 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about -0.01 per unit of risk. If you would invest  19.00  in Telkom Indonesia Tbk on October 22, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 15.79% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Reliance Industries 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Reliance Industries

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

The idea behind Telkom Indonesia Tbk and Reliance Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.