Correlation Between Telkom Indonesia and China Railway

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

Diversification Opportunities for Telkom Indonesia and China Railway

-0.33

Correlation Coefficient

Telkom Indonesia  China Railway

Very good diversification

The 3 months correlation between Telkom and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and China Railway go up and down completely randomly.

Pair Corralation between Telkom Indonesia and China Railway

If you would invest  51.00  in China Railway Construction on September 23, 2024 and sell it today you would earn a total of  13.00  from holding China Railway Construction or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.37%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  China Railway Construction

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. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

China Railway Constr

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and China Railway

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

The idea behind Telkom Indonesia Tbk and China Railway Construction 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.