Correlation Between Telkom Indonesia and Cogent Communications

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

Diversification Opportunities for Telkom Indonesia and Cogent Communications

0.72

Correlation Coefficient

Telkom Indonesia  Cogent Communications

Poor diversification

The 3 months correlation between Telkom and Cogent is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications 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 Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Cogent Communications go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Cogent Communications

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the Cogent Communications. In addition to that, Telkom Indonesia is 2.36 times more volatile than Cogent Communications Group. It trades about -0.03 of its total potential returns per unit of risk. Cogent Communications Group is currently generating about -0.08 per unit of volatility. If you would invest  8,091  in Cogent Communications Group on October 25, 2024 and sell it today you would lose (637.00) from holding Cogent Communications Group or give up 7.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Cogent Communications Group

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 fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cogent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Communications Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Telkom Indonesia and Cogent Communications

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

The idea behind Telkom Indonesia Tbk and Cogent Communications Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.