Correlation Between Telkom Indonesia and Volkswagen

Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Volkswagen 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 Volkswagen 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 Volkswagen AG 110, you can compare the effects of market volatilities on Telkom Indonesia and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Volkswagen.

Diversification Opportunities for Telkom Indonesia and Volkswagen

-0.66

Correlation Coefficient

Telkom Indonesia  Volkswagen

Excellent diversification

The 3 months correlation between Telkom and Volkswagen is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Volkswagen go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Volkswagen

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Volkswagen. In addition to that, Telkom Indonesia is 1.11 times more volatile than Volkswagen AG 110. It trades about -0.07 of its total potential returns per unit of risk. Volkswagen AG 110 is currently generating about 0.11 per unit of volatility. If you would invest  936.00  in Volkswagen AG 110 on December 30, 2024 and sell it today you would earn a total of  131.00  from holding Volkswagen AG 110 or generate 14.0% 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.  Volkswagen AG 110

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.

Volkswagen AG 110

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG 110 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Volkswagen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Volkswagen

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

The idea behind Telkom Indonesia Tbk and Volkswagen AG 110 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.