Correlation Between Telkom Indonesia and PLDT

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

Diversification Opportunities for Telkom Indonesia and PLDT

0.88

Correlation Coefficient

Telkom Indonesia  PLDT

Very poor diversification

The 3 months correlation between Telkom and PLDT is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and PLDT Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLDT Inc ADR 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 PLDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLDT Inc ADR has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and PLDT go up and down completely randomly.

Pair Corralation between Telkom Indonesia and PLDT

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 1.19 times more return on investment than PLDT. However, Telkom Indonesia is 1.19 times more volatile than PLDT Inc ADR. It trades about -0.14 of its potential returns per unit of risk. PLDT Inc ADR is currently generating about -0.22 per unit of risk. If you would invest  1,960  in Telkom Indonesia Tbk on August 30, 2024 and sell it today you would lose (279.00) from holding Telkom Indonesia Tbk or give up 14.23% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  PLDT Inc ADR

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PLDT Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLDT Inc ADR 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 technical indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Telkom Indonesia and PLDT

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

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