Correlation Between Telkom Indonesia and Pegasus Tel

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

Diversification Opportunities for Telkom Indonesia and Pegasus Tel

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Telkom and Pegasus is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Pegasus Tel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Tel 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 Pegasus Tel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Tel has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Pegasus Tel go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Pegasus Tel

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to generate 0.44 times more return on investment than Pegasus Tel. However, Telkom Indonesia Tbk is 2.27 times less risky than Pegasus Tel. It trades about 0.09 of its potential returns per unit of risk. Pegasus Tel is currently generating about 0.01 per unit of risk. If you would invest  16.00  in Telkom Indonesia Tbk on September 6, 2024 and sell it today you would earn a total of  3.00  from holding Telkom Indonesia Tbk or generate 18.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Telkom Indonesia Tbk  vs.  Pegasus Tel

 Performance 
       Timeline  
Telkom Indonesia Tbk 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.
Pegasus Tel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Pegasus Tel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Pegasus Tel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Telkom Indonesia and Pegasus Tel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telkom Indonesia and Pegasus Tel

The main advantage of trading using opposite Telkom Indonesia and Pegasus Tel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Pegasus Tel 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 Pegasus Tel will offset losses from the drop in Pegasus Tel's long position.
The idea behind Telkom Indonesia Tbk and Pegasus Tel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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