Correlation Between Telkom Indonesia and Ecolab

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

Diversification Opportunities for Telkom Indonesia and Ecolab

-0.35

Correlation Coefficient

Telkom Indonesia  Ecolab

Very good diversification

The 3 months correlation between Telkom and Ecolab is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Ecolab go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Ecolab

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Ecolab. In addition to that, Telkom Indonesia is 4.55 times more volatile than Ecolab Inc. It trades about -0.07 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.06 per unit of volatility. If you would invest  22,750  in Ecolab Inc on August 31, 2024 and sell it today you would earn a total of  650.00  from holding Ecolab Inc or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.78%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Ecolab Inc

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.

Ecolab Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Ecolab

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

The idea behind Telkom Indonesia Tbk and Ecolab Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..