Correlation Between Telkom Indonesia and Central Japan

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

Diversification Opportunities for Telkom Indonesia and Central Japan

-0.65

Correlation Coefficient

Telkom Indonesia  Central Japan

Excellent diversification

The 3 months correlation between Telkom and Central is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway 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 Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Central Japan go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Central Japan

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Central Japan. In addition to that, Telkom Indonesia is 1.5 times more volatile than Central Japan Railway. It trades about -0.1 of its total potential returns per unit of risk. Central Japan Railway is currently generating about 0.09 per unit of volatility. If you would invest  924.00  in Central Japan Railway on December 26, 2024 and sell it today you would earn a total of  69.00  from holding Central Japan Railway or generate 7.47% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Central Japan Railway

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 conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Central Japan Railway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Japan Railway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Central Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telkom Indonesia and Central Japan

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

The idea behind Telkom Indonesia Tbk and Central Japan Railway 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.