Correlation Between Visa and Telkom Indonesia

Can any of the company-specific risk be diversified away by investing in both Visa and Telkom Indonesia 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 Visa and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Visa and Telkom Indonesia 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 Visa with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Telkom Indonesia.

Diversification Opportunities for Visa and Telkom Indonesia

-0.63

Correlation Coefficient

Visa  Telkom Indonesia

Excellent diversification

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

Pair Corralation between Visa and Telkom Indonesia

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.23 times more return on investment than Telkom Indonesia. However, Visa Class A is 4.38 times less risky than Telkom Indonesia. It trades about 0.09 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.01 per unit of risk. If you would invest  25,102  in Visa Class A on September 23, 2024 and sell it today you would earn a total of  6,669  from holding Visa Class A or generate 26.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.54%
Values	Daily Returns

Visa Class A  vs.  Telkom Indonesia Tbk

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa and Telkom Indonesia

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

The idea behind Visa Class A and Telkom Indonesia Tbk 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.