Correlation Between Telkom Indonesia and Renault SA

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

Diversification Opportunities for Telkom Indonesia and Renault SA

-0.34

Correlation Coefficient

Telkom Indonesia  Renault SA

Very good diversification

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

Pair Corralation between Telkom Indonesia and Renault SA

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the Renault SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.12 times less risky than Renault SA. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Renault SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Renault SA on September 30, 2024 and sell it today you would lose (540.00) from holding Renault SA or give up 10.0% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Renault SA

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 weak 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.

Renault SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renault SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Renault SA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Renault SA

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

The idea behind Telkom Indonesia Tbk and Renault SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.