Correlation Between Telkom Indonesia and BASF SE

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

Diversification Opportunities for Telkom Indonesia and BASF SE

-0.77

Correlation Coefficient

Telkom Indonesia  BASF SE

Pay attention - limited upside

The 3 months correlation between Telkom and BASF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and BASF SE go up and down completely randomly.

Pair Corralation between Telkom Indonesia and BASF SE

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the BASF SE. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.11 times less risky than BASF SE. The stock trades about -0.08 of its potential returns per unit of risk. The BASF SE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,246  in BASF SE on December 30, 2024 and sell it today you would earn a total of  498.00  from holding BASF SE or generate 11.73% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  BASF SE

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BASF SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BASF SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and BASF SE

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

The idea behind Telkom Indonesia Tbk and BASF SE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.