Correlation Between Telkom Indonesia and Unico American

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

Diversification Opportunities for Telkom Indonesia and Unico American

-0.67

Correlation Coefficient

Telkom Indonesia  Unico American

Excellent diversification

The 3 months correlation between Telkom and Unico is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Unico American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unico American 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 Unico American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unico American has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Unico American go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Unico American

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Unico American. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 2.61 times less risky than Unico American. The stock trades about -0.02 of its potential returns per unit of risk. The Unico American is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.80  in Unico American on December 18, 2024 and sell it today you would earn a total of  1.20  from holding Unico American or generate 20.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	46.67%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Unico American

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 quite persistent essential indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Unico American

Risk-Adjusted Performance

Good

Over the last 90 days Unico American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent basic indicators, Unico American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Unico American

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

The idea behind Telkom Indonesia Tbk and Unico American 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.