Correlation Between Telkom Indonesia and General Environmental

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

Diversification Opportunities for Telkom Indonesia and General Environmental

-0.55

Correlation Coefficient

Telkom Indonesia  General Environmental

Excellent diversification

The 3 months correlation between Telkom and General is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and General Environmental Manageme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Environmental 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 General Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Environmental has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and General Environmental go up and down completely randomly.

Pair Corralation between Telkom Indonesia and General Environmental

Assuming the 90 days horizon Telkom Indonesia is expected to generate 5.21 times less return on investment than General Environmental. But when comparing it to its historical volatility, Telkom Indonesia Tbk is 7.96 times less risky than General Environmental. It trades about 0.19 of its potential returns per unit of risk. General Environmental Management is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  74.00  in General Environmental Management on December 29, 2024 and sell it today you would earn a total of  46.00  from holding General Environmental Management or generate 62.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	44.26%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  General Environmental Manageme

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.

General Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Environmental Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, General Environmental demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and General Environmental

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

The idea behind Telkom Indonesia Tbk and General Environmental Management 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.