Correlation Between Telkom Indonesia and Sarama Resources

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

Diversification Opportunities for Telkom Indonesia and Sarama Resources

0.68

Correlation Coefficient

Telkom Indonesia  Sarama Resources

Poor diversification

The 3 months correlation between Telkom and Sarama is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Sarama Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarama Resources 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 Sarama Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarama Resources has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Sarama Resources go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Sarama Resources

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.19 times more return on investment than Sarama Resources. However, Telkom Indonesia Tbk is 5.21 times less risky than Sarama Resources. It trades about -0.07 of its potential returns per unit of risk. Sarama Resources is currently generating about -0.11 per unit of risk. If you would invest  1,643  in Telkom Indonesia Tbk on December 28, 2024 and sell it today you would lose (171.00) from holding Telkom Indonesia Tbk or give up 10.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Sarama Resources

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 weak 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.

Sarama Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sarama Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Telkom Indonesia and Sarama Resources

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

The idea behind Telkom Indonesia Tbk and Sarama Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.