Correlation Between Telkom Indonesia and Komatsu

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

Diversification Opportunities for Telkom Indonesia and Komatsu

-0.39

Correlation Coefficient

Telkom Indonesia  Komatsu

Very good diversification

The 3 months correlation between Telkom and Komatsu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Komatsu go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Komatsu

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Komatsu. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.47 times less risky than Komatsu. The stock trades about -0.15 of its potential returns per unit of risk. The Komatsu is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,476  in Komatsu on September 17, 2024 and sell it today you would earn a total of  442.00  from holding Komatsu or generate 17.85% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Komatsu

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

Komatsu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Komatsu reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Komatsu

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

The idea behind Telkom Indonesia Tbk and Komatsu 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.