Correlation Between Telkom Indonesia and Starbucks

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

Diversification Opportunities for Telkom Indonesia and Starbucks

-0.28

Correlation Coefficient

Telkom Indonesia  Starbucks

Very good diversification

The 3 months correlation between Telkom and Starbucks is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Starbucks go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Starbucks

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 5.14 times more return on investment than Starbucks. However, Telkom Indonesia is 5.14 times more volatile than Starbucks. It trades about 0.01 of its potential returns per unit of risk. Starbucks is currently generating about 0.03 per unit of risk. If you would invest  17.00  in Telkom Indonesia Tbk on December 26, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Starbucks

Telkom Indonesia Tbk

Risk-Adjusted Performance

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.

Starbucks

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Starbucks is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telkom Indonesia and Starbucks

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

The idea behind Telkom Indonesia Tbk and Starbucks 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.