Correlation Between Telkom Indonesia and Universal Power

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

Diversification Opportunities for Telkom Indonesia and Universal Power

0.56

Correlation Coefficient

Telkom Indonesia  Universal Power

Very weak diversification

The 3 months correlation between Telkom and Universal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Universal Power Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Power Industry 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 Universal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Power Industry has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Universal Power go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Universal Power

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Universal Power. In addition to that, Telkom Indonesia is 2.22 times more volatile than Universal Power Industry. It trades about -0.12 of its total potential returns per unit of risk. Universal Power Industry is currently generating about -0.17 per unit of volatility. If you would invest  0.37  in Universal Power Industry on September 2, 2024 and sell it today you would lose (0.03) from holding Universal Power Industry or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Universal Power Industry

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

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

Universal Power Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Power Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Telkom Indonesia and Universal Power

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

The idea behind Telkom Indonesia Tbk and Universal Power Industry 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.