Correlation Between Telkom Indonesia and Lumen Technologies

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

Diversification Opportunities for Telkom Indonesia and Lumen Technologies

0.6

Correlation Coefficient

Telkom Indonesia  Lumen Technologies

Poor diversification

The 3 months correlation between Telkom and Lumen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Lumen Technologies go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Lumen Technologies

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.56 times more return on investment than Lumen Technologies. However, Telkom Indonesia Tbk is 1.8 times less risky than Lumen Technologies. It trades about -0.06 of its potential returns per unit of risk. Lumen Technologies is currently generating about -0.09 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.  Lumen Technologies

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.

Lumen Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Telkom Indonesia and Lumen Technologies

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

The idea behind Telkom Indonesia Tbk and Lumen Technologies 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.