Correlation Between Telkom Indonesia and Aeroports

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

Diversification Opportunities for Telkom Indonesia and Aeroports

-0.63

Correlation Coefficient

Telkom Indonesia  Aeroports

Excellent diversification

The 3 months correlation between Telkom and Aeroports is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris 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 Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Aeroports go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Aeroports

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to generate 0.56 times more return on investment than Aeroports. However, Telkom Indonesia Tbk is 1.78 times less risky than Aeroports. It trades about 0.19 of its potential returns per unit of risk. Aeroports de Paris is currently generating about 0.05 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Telkom Indonesia Tbk or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	42.19%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Aeroports de Paris

Telkom Indonesia Tbk

Risk-Adjusted Performance

Good

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile primary indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Aeroports de Paris

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeroports de Paris are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Aeroports may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telkom Indonesia and Aeroports

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

The idea behind Telkom Indonesia Tbk and Aeroports de Paris 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.