Correlation Between Telkom Indonesia and Capstone Technologies

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

Diversification Opportunities for Telkom Indonesia and Capstone Technologies

0.3

Correlation Coefficient

Telkom Indonesia  Capstone Technologies

Weak diversification

The 3 months correlation between Telkom and Capstone is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Capstone Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Technologies 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 Capstone Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Technologies has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Capstone Technologies go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Capstone Technologies

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Capstone Technologies. In addition to that, Telkom Indonesia is 6.43 times more volatile than Capstone Technologies Group. It trades about -0.06 of its total potential returns per unit of risk. Capstone Technologies Group is currently generating about -0.13 per unit of volatility. If you would invest  36.00  in Capstone Technologies Group on December 29, 2024 and sell it today you would lose (1.00) from holding Capstone Technologies Group or give up 2.78% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Capstone Technologies Group

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 weak 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.

Capstone Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capstone Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Capstone Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Capstone Technologies

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

The idea behind Telkom Indonesia Tbk and Capstone Technologies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.