Correlation Between Telkom Indonesia and Terregra Asia

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

Diversification Opportunities for Telkom Indonesia and Terregra Asia

0.47

Correlation Coefficient

Telkom Indonesia  Terregra Asia

Very weak diversification

The 3 months correlation between Telkom and Terregra is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy 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 Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Terregra Asia go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Terregra Asia

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 0.53 times more return on investment than Terregra Asia. However, Telkom Indonesia Tbk is 1.88 times less risky than Terregra Asia. It trades about 0.17 of its potential returns per unit of risk. Terregra Asia Energy is currently generating about -0.13 per unit of risk. If you would invest  254,000  in Telkom Indonesia Tbk on September 16, 2024 and sell it today you would earn a total of  22,000  from holding Telkom Indonesia Tbk or generate 8.66% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Terregra Asia Energy

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 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.

Terregra Asia Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terregra Asia Energy 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 January 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 Terregra Asia

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

The idea behind Telkom Indonesia Tbk and Terregra Asia Energy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.