Correlation Between Vodafone Group and Telkom Indonesia

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

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

Diversification Opportunities for Vodafone Group and Telkom Indonesia

0.39

Correlation Coefficient

Vodafone Group  Telkom Indonesia

Weak diversification

The 3 months correlation between Vodafone and Telkom is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Vodafone Group and Telkom Indonesia

Assuming the 90 days horizon Vodafone Group PLC is expected to generate 1.83 times more return on investment than Telkom Indonesia. However, Vodafone Group is 1.83 times more volatile than Telkom Indonesia Tbk. It trades about -0.02 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.1 per unit of risk. If you would invest  89.00  in Vodafone Group PLC on December 1, 2024 and sell it today you would lose (6.00) from holding Vodafone Group PLC or give up 6.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	54.0%
Values	Daily Returns

Vodafone Group PLC  vs.  Telkom Indonesia Tbk

Vodafone Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vodafone Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vodafone Group and Telkom Indonesia

The main advantage of trading using opposite Vodafone Group and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.