Correlation Between Telkom Indonesia and Citigroup

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

Diversification Opportunities for Telkom Indonesia and Citigroup

-0.37

Correlation Coefficient

Telkom Indonesia  Citigroup

Very good diversification

The 3 months correlation between Telkom and Citigroup is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Citigroup go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Citigroup

Assuming the 90 days trading horizon Telkom Indonesia is expected to generate 1.63 times less return on investment than Citigroup. In addition to that, Telkom Indonesia is 6.31 times more volatile than Citigroup. It trades about 0.03 of its total potential returns per unit of risk. Citigroup is currently generating about 0.28 per unit of volatility. If you would invest  6,600  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,099  from holding Citigroup or generate 16.65% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Citigroup

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.

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Citigroup

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

The idea behind Telkom Indonesia Tbk and Citigroup 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.