Correlation Between Telkom Indonesia and NTT Data

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

Diversification Opportunities for Telkom Indonesia and NTT Data

-0.32

Correlation Coefficient

Telkom Indonesia  NTT Data

Very good diversification

The 3 months correlation between Telkom and NTT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and NTT Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT Data Corp 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 NTT Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT Data Corp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and NTT Data go up and down completely randomly.

Pair Corralation between Telkom Indonesia and NTT Data

Considering the 90-day investment horizon Telkom Indonesia is expected to generate 1.55 times less return on investment than NTT Data. But when comparing it to its historical volatility, Telkom Indonesia Tbk is 1.17 times less risky than NTT Data. It trades about 0.14 of its potential returns per unit of risk. NTT Data Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,730  in NTT Data Corp on September 16, 2024 and sell it today you would earn a total of  174.00  from holding NTT Data Corp or generate 10.06% 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.  NTT Data Corp

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.

NTT Data Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTT Data Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NTT Data showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and NTT Data

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

The idea behind Telkom Indonesia Tbk and NTT Data Corp 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 CEOs Directory module to screen CEOs from public companies around the world.