Correlation Between Telkom Indonesia and Komatsu

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

Diversification Opportunities for Telkom Indonesia and Komatsu

0.02

Correlation Coefficient

Telkom Indonesia  Komatsu

Significant diversification

The 3 months correlation between Telkom and Komatsu is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Komatsu go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Komatsu

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the Komatsu. In addition to that, Telkom Indonesia is 3.93 times more volatile than Komatsu. It trades about -0.08 of its total potential returns per unit of risk. Komatsu is currently generating about 0.04 per unit of volatility. If you would invest  2,686  in Komatsu on October 6, 2024 and sell it today you would earn a total of  51.00  from holding Komatsu or generate 1.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Komatsu

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 fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Komatsu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Komatsu has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Komatsu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telkom Indonesia and Komatsu

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

The idea behind Telkom Indonesia Tbk and Komatsu 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.