Correlation Between Telkom Indonesia and Mentor Capital

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

Diversification Opportunities for Telkom Indonesia and Mentor Capital

-0.53

Correlation Coefficient

Telkom Indonesia  Mentor Capital

Excellent diversification

The 3 months correlation between Telkom and Mentor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Mentor Capital go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Mentor Capital

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Mentor Capital. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 10.44 times less risky than Mentor Capital. The stock trades about -0.04 of its potential returns per unit of risk. The Mentor Capital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Mentor Capital on October 10, 2024 and sell it today you would earn a total of  2.50  from holding Mentor Capital or generate 62.5% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Mentor Capital

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

Mentor Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mentor Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Mentor Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Mentor Capital

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

The idea behind Telkom Indonesia Tbk and Mentor Capital 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.