Correlation Between Telkom Indonesia and Albemarle

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

Diversification Opportunities for Telkom Indonesia and Albemarle

-0.75

Correlation Coefficient

Telkom Indonesia  Albemarle

Pay attention - limited upside

The 3 months correlation between Telkom and Albemarle is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Albemarle go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Albemarle

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Albemarle. In addition to that, Telkom Indonesia is 1.19 times more volatile than Albemarle. It trades about -0.05 of its total potential returns per unit of risk. Albemarle is currently generating about 0.11 per unit of volatility. If you would invest  8,095  in Albemarle on August 31, 2024 and sell it today you would earn a total of  2,181  from holding Albemarle or generate 26.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Albemarle

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Albemarle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Albemarle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Albemarle

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

The idea behind Telkom Indonesia Tbk and Albemarle 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.