Correlation Between Telkom Indonesia and Solusi Bangun

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

Diversification Opportunities for Telkom Indonesia and Solusi Bangun

-0.51

Correlation Coefficient

Telkom Indonesia  Solusi Bangun

Excellent diversification

The 3 months correlation between Telkom and Solusi is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Solusi Bangun Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solusi Bangun Indonesia 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 Solusi Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solusi Bangun Indonesia has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Solusi Bangun go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Solusi Bangun

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Solusi Bangun. In addition to that, Telkom Indonesia is 2.76 times more volatile than Solusi Bangun Indonesia. It trades about -0.06 of its total potential returns per unit of risk. Solusi Bangun Indonesia is currently generating about 0.07 per unit of volatility. If you would invest  74,500  in Solusi Bangun Indonesia on December 1, 2024 and sell it today you would earn a total of  3,000  from holding Solusi Bangun Indonesia or generate 4.03% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Solusi Bangun Indonesia

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 forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Solusi Bangun Indonesia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solusi Bangun Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Solusi Bangun is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Telkom Indonesia and Solusi Bangun

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

The idea behind Telkom Indonesia Tbk and Solusi Bangun Indonesia 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.