Correlation Between Telkom Indonesia and Power Metals

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

Diversification Opportunities for Telkom Indonesia and Power Metals

-0.66

Correlation Coefficient

Telkom Indonesia  Power Metals

Excellent diversification

The 3 months correlation between Telkom and Power is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Power Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metals 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 Power Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metals Corp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Power Metals go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Power Metals

Assuming the 90 days horizon Telkom Indonesia is expected to generate 9.11 times less return on investment than Power Metals. But when comparing it to its historical volatility, Telkom Indonesia Tbk is 1.21 times less risky than Power Metals. It trades about 0.01 of its potential returns per unit of risk. Power Metals Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Power Metals Corp on October 12, 2024 and sell it today you would earn a total of  1.00  from holding Power Metals Corp or generate 3.23% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Power Metals Corp

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 latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Power Metals Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Power Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Power Metals

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

The idea behind Telkom Indonesia Tbk and Power Metals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.