Correlation Between Telkom Indonesia and Roche Holding

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

Diversification Opportunities for Telkom Indonesia and Roche Holding

-0.7

Correlation Coefficient

Telkom Indonesia  Roche Holding

Excellent diversification

The 3 months correlation between Telkom and Roche is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Roche Holding go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Roche Holding

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Roche Holding. In addition to that, Telkom Indonesia is 1.65 times more volatile than Roche Holding Ltd. It trades about -0.11 of its total potential returns per unit of risk. Roche Holding Ltd is currently generating about 0.26 per unit of volatility. If you would invest  3,500  in Roche Holding Ltd on December 25, 2024 and sell it today you would earn a total of  792.00  from holding Roche Holding Ltd or generate 22.63% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Roche Holding Ltd

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

Roche Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roche Holding Ltd are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Roche Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Roche Holding

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

The idea behind Telkom Indonesia Tbk and Roche Holding Ltd 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.