Correlation Between Telkom Indonesia and Quaker Chemical

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

Diversification Opportunities for Telkom Indonesia and Quaker Chemical

0.15

Correlation Coefficient

Telkom Indonesia  Quaker Chemical

Average diversification

The 3 months correlation between Telkom and Quaker is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Quaker Chemical go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Quaker Chemical

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Quaker Chemical. In addition to that, Telkom Indonesia is 1.27 times more volatile than Quaker Chemical. It trades about -0.08 of its total potential returns per unit of risk. Quaker Chemical is currently generating about -0.1 per unit of volatility. If you would invest  14,844  in Quaker Chemical on December 1, 2024 and sell it today you would lose (1,644) from holding Quaker Chemical or give up 11.08% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Quaker Chemical

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 fragile 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.

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Telkom Indonesia and Quaker Chemical

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

The idea behind Telkom Indonesia Tbk and Quaker Chemical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.