Correlation Between Telkom Indonesia and Starco Brands

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

Diversification Opportunities for Telkom Indonesia and Starco Brands

0.59

Correlation Coefficient

Telkom Indonesia  Starco Brands

Very weak diversification

The 3 months correlation between Telkom and Starco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Starco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starco Brands 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 Starco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starco Brands has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Starco Brands go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Starco Brands

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Starco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 5.05 times less risky than Starco Brands. The stock trades about -0.07 of its potential returns per unit of risk. The Starco Brands is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7.80  in Starco Brands on December 27, 2024 and sell it today you would lose (2.90) from holding Starco Brands or give up 37.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Starco Brands

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.

Starco Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Starco Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Telkom Indonesia and Starco Brands

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

The idea behind Telkom Indonesia Tbk and Starco Brands 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.