Correlation Between Telkom Indonesia and VEON

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

Diversification Opportunities for Telkom Indonesia and VEON

-0.77

Correlation Coefficient

Telkom Indonesia  VEON

Pay attention - limited upside

The 3 months correlation between Telkom and VEON is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and VEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VEON 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 VEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VEON has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and VEON go up and down completely randomly.

Pair Corralation between Telkom Indonesia and VEON

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the VEON. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.22 times less risky than VEON. The stock trades about -0.1 of its potential returns per unit of risk. The VEON is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,799  in VEON on September 12, 2024 and sell it today you would earn a total of  861.00  from holding VEON or generate 30.76% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  VEON

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 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.

VEON

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VEON are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VEON displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and VEON

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

The idea behind Telkom Indonesia Tbk and VEON 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.