Correlation Between Telkom Indonesia and Mandom Indonesia

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

Diversification Opportunities for Telkom Indonesia and Mandom Indonesia

0.64

Correlation Coefficient

Telkom Indonesia  Mandom Indonesia

Poor diversification

The 3 months correlation between Telkom and Mandom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Mandom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mandom Indonesia Tbk 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 Mandom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mandom Indonesia Tbk has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Mandom Indonesia go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Mandom Indonesia

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 1.11 times more return on investment than Mandom Indonesia. However, Telkom Indonesia is 1.11 times more volatile than Mandom Indonesia Tbk. It trades about -0.15 of its potential returns per unit of risk. Mandom Indonesia Tbk is currently generating about -0.22 per unit of risk. If you would invest  266,000  in Telkom Indonesia Tbk on December 2, 2024 and sell it today you would lose (29,000) from holding Telkom Indonesia Tbk or give up 10.9% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Mandom Indonesia Tbk

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.

Mandom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mandom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Telkom Indonesia and Mandom Indonesia

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

The idea behind Telkom Indonesia Tbk and Mandom Indonesia Tbk 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.