Correlation Between CHINA TELECOM and HEXINDO ADIPERKASA

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

By analyzing existing cross correlation between CHINA TELECOM H and HEXINDO ADIPERKASA, you can compare the effects of market volatilities on CHINA TELECOM and HEXINDO ADIPERKASA 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 CHINA TELECOM with a short position of HEXINDO ADIPERKASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and HEXINDO ADIPERKASA.

Diversification Opportunities for CHINA TELECOM and HEXINDO ADIPERKASA

0.78

Correlation Coefficient

CHINA TELECOM  HEXINDO ADIPERKASA

Poor diversification

The 3 months correlation between CHINA and HEXINDO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and HEXINDO ADIPERKASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXINDO ADIPERKASA and CHINA TELECOM 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 CHINA TELECOM H are associated (or correlated) with HEXINDO ADIPERKASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXINDO ADIPERKASA has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and HEXINDO ADIPERKASA go up and down completely randomly.

Pair Corralation between CHINA TELECOM and HEXINDO ADIPERKASA

Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 0.21 times more return on investment than HEXINDO ADIPERKASA. However, CHINA TELECOM H is 4.82 times less risky than HEXINDO ADIPERKASA. It trades about -0.16 of its potential returns per unit of risk. HEXINDO ADIPERKASA is currently generating about -0.06 per unit of risk. If you would invest  56.00  in CHINA TELECOM H on October 13, 2024 and sell it today you would lose (4.00) from holding CHINA TELECOM H or give up 7.14% of portfolio value over 90 days.

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

CHINA TELECOM H   vs.  HEXINDO ADIPERKASA

CHINA TELECOM H

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA TELECOM H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HEXINDO ADIPERKASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXINDO ADIPERKASA 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CHINA TELECOM and HEXINDO ADIPERKASA

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

The idea behind CHINA TELECOM H and HEXINDO ADIPERKASA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.