Correlation Between Virtus Investment and Telkom Indonesia

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

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

Diversification Opportunities for Virtus Investment and Telkom Indonesia

-0.65

Correlation Coefficient

Virtus Investment  Telkom Indonesia

Excellent diversification

The 3 months correlation between Virtus and Telkom is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners 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 Virtus Investment 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 Virtus Investment Partners 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 Virtus Investment i.e., Virtus Investment and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Virtus Investment and Telkom Indonesia

Assuming the 90 days horizon Virtus Investment Partners is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Virtus Investment Partners is 2.72 times less risky than Telkom Indonesia. The stock trades about -0.35 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Telkom Indonesia Tbk on September 25, 2024 and sell it today you would lose (1.00) from holding Telkom Indonesia Tbk or give up 6.67% of portfolio value over 90 days.

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

Virtus Investment Partners  vs.  Telkom Indonesia Tbk

Virtus Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtus Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Virtus Investment and Telkom Indonesia

The main advantage of trading using opposite Virtus Investment and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Investment 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 Virtus Investment Partners 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.