Correlation Between Telkom Indonesia and QBE Insurance

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

Diversification Opportunities for Telkom Indonesia and QBE Insurance

-0.57

Correlation Coefficient

Telkom Indonesia  QBE Insurance

Excellent diversification

The 3 months correlation between Telkom and QBE is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and QBE Insurance go up and down completely randomly.

Pair Corralation between Telkom Indonesia and QBE Insurance

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 4.25 times more return on investment than QBE Insurance. However, Telkom Indonesia is 4.25 times more volatile than QBE Insurance Group. It trades about -0.03 of its potential returns per unit of risk. QBE Insurance Group is currently generating about -0.22 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on September 23, 2024 and sell it today you would lose (1.00) from holding Telkom Indonesia Tbk or give up 6.67% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  QBE Insurance Group

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 uncertain 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.

QBE Insurance Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telkom Indonesia and QBE Insurance

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

The idea behind Telkom Indonesia Tbk and QBE Insurance Group 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.