Correlation Between Telkom Indonesia and SK Telecom

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

Diversification Opportunities for Telkom Indonesia and SK Telecom

-0.03

Correlation Coefficient

Telkom Indonesia  SK Telecom

Good diversification

The 3 months correlation between Telkom and SKM is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and SK Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom 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 SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and SK Telecom go up and down completely randomly.

Pair Corralation between Telkom Indonesia and SK Telecom

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the SK Telecom. In addition to that, Telkom Indonesia is 1.9 times more volatile than SK Telecom Co. It trades about -0.08 of its total potential returns per unit of risk. SK Telecom Co is currently generating about -0.01 per unit of volatility. If you would invest  2,149  in SK Telecom Co on December 27, 2024 and sell it today you would lose (20.00) from holding SK Telecom Co or give up 0.93% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  SK Telecom Co

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.

SK Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Telkom Indonesia and SK Telecom

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

The idea behind Telkom Indonesia Tbk and SK Telecom Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.