Correlation Between Vulcan Materials and Telkom Indonesia

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

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

Diversification Opportunities for Vulcan Materials and Telkom Indonesia

0.64

Correlation Coefficient

Vulcan Materials  Telkom Indonesia

Poor diversification

The 3 months correlation between Vulcan and Telkom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Vulcan Materials and Telkom Indonesia

Assuming the 90 days horizon Vulcan Materials is expected to generate 0.7 times more return on investment than Telkom Indonesia. However, Vulcan Materials is 1.43 times less risky than Telkom Indonesia. It trades about -0.12 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.12 per unit of risk. If you would invest  24,944  in Vulcan Materials on December 22, 2024 and sell it today you would lose (2,944) from holding Vulcan Materials or give up 11.8% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Telkom Indonesia Tbk

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

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

Pair Trading with Vulcan Materials and Telkom Indonesia

The main advantage of trading using opposite Vulcan Materials and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.