Correlation Between Telkom Indonesia and China Gold

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

Diversification Opportunities for Telkom Indonesia and China Gold

-0.64

Correlation Coefficient

Telkom Indonesia  China Gold

Excellent diversification

The 3 months correlation between Telkom and China is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International 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 China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and China Gold go up and down completely randomly.

Pair Corralation between Telkom Indonesia and China Gold

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the China Gold. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.26 times less risky than China Gold. The stock trades about -0.06 of its potential returns per unit of risk. The China Gold International is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  480.00  in China Gold International on December 28, 2024 and sell it today you would earn a total of  190.00  from holding China Gold International or generate 39.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  China Gold International

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.

China Gold International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, China Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and China Gold

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

The idea behind Telkom Indonesia Tbk and China Gold International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.