Correlation Between Telkom Indonesia and Flow Capital

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

Diversification Opportunities for Telkom Indonesia and Flow Capital

0.77

Correlation Coefficient

Telkom Indonesia  Flow Capital

Poor diversification

The 3 months correlation between Telkom and Flow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Flow Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Capital Corp 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 Flow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Capital Corp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Flow Capital go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Flow Capital

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 1.34 times more return on investment than Flow Capital. However, Telkom Indonesia is 1.34 times more volatile than Flow Capital Corp. It trades about -0.06 of its potential returns per unit of risk. Flow Capital Corp is currently generating about -0.13 per unit of risk. If you would invest  1,643  in Telkom Indonesia Tbk on December 28, 2024 and sell it today you would lose (152.00) from holding Telkom Indonesia Tbk or give up 9.25% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Flow Capital Corp

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. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Flow Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flow Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Telkom Indonesia and Flow Capital

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

The idea behind Telkom Indonesia Tbk and Flow Capital Corp 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.