Correlation Between Telkom Indonesia and BJs Restaurants

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

Diversification Opportunities for Telkom Indonesia and BJs Restaurants

0.29

Correlation Coefficient

Telkom Indonesia  BJs Restaurants

Modest diversification

The 3 months correlation between Telkom and BJs is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants 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 BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and BJs Restaurants go up and down completely randomly.

Pair Corralation between Telkom Indonesia and BJs Restaurants

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 4.15 times more return on investment than BJs Restaurants. However, Telkom Indonesia is 4.15 times more volatile than BJs Restaurants. It trades about 0.01 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.01 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on December 29, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  BJs Restaurants

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BJs Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days BJs Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BJs Restaurants is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telkom Indonesia and BJs Restaurants

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

The idea behind Telkom Indonesia Tbk and BJs Restaurants 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 Commodity Directory module to find actively traded commodities issued by global exchanges.