Correlation Between Telkom Indonesia and Sensor Technologies

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

Diversification Opportunities for Telkom Indonesia and Sensor Technologies

0.63

Correlation Coefficient

Telkom Indonesia  Sensor Technologies

Poor diversification

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

Pair Corralation between Telkom Indonesia and Sensor Technologies

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to generate 0.14 times more return on investment than Sensor Technologies. However, Telkom Indonesia Tbk is 7.06 times less risky than Sensor Technologies. It trades about 0.19 of its potential returns per unit of risk. Sensor Technologies Corp is currently generating about -0.12 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on December 22, 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 Together
Strength	Significant
Accuracy	42.19%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Sensor Technologies Corp

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.

Sensor Technologies Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensor Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Telkom Indonesia and Sensor Technologies

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

The idea behind Telkom Indonesia Tbk and Sensor Technologies Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.