Correlation Between Telkom Indonesia and Life Electric

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

Diversification Opportunities for Telkom Indonesia and Life Electric

-0.34

Correlation Coefficient

Telkom Indonesia  Life Electric

Very good diversification

The 3 months correlation between Telkom and Life is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Life Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Electric Vehicles 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 Life Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Electric Vehicles has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Life Electric go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Life Electric

Assuming the 90 days horizon Telkom Indonesia is expected to generate 16.93 times less return on investment than Life Electric. But when comparing it to its historical volatility, Telkom Indonesia Tbk is 2.56 times less risky than Life Electric. It trades about 0.02 of its potential returns per unit of risk. Life Electric Vehicles is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Life Electric Vehicles on September 17, 2024 and sell it today you would earn a total of  7.00  from holding Life Electric Vehicles or generate 28.0% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Life Electric Vehicles

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Life Electric Vehicles

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Life Electric Vehicles are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Life Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telkom Indonesia and Life Electric

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

The idea behind Telkom Indonesia Tbk and Life Electric Vehicles 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.