Correlation Between Coreshares Index and Telkom

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

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

Diversification Opportunities for Coreshares Index and Telkom

-0.03

Correlation Coefficient

Coreshares Index  Telkom

Good diversification

The 3 months correlation between Coreshares and Telkom is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and Telkom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom and Coreshares Index 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 Coreshares Index Tracker are associated (or correlated) with Telkom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom has no effect on the direction of Coreshares Index i.e., Coreshares Index and Telkom go up and down completely randomly.

Pair Corralation between Coreshares Index and Telkom

Assuming the 90 days trading horizon Coreshares Index is expected to generate 9.33 times less return on investment than Telkom. But when comparing it to its historical volatility, Coreshares Index Tracker is 1.78 times less risky than Telkom. It trades about 0.05 of its potential returns per unit of risk. Telkom is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  273,700  in Telkom on September 13, 2024 and sell it today you would earn a total of  81,700  from holding Telkom or generate 29.85% return on investment over 90 days.

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

Coreshares Index Tracker  vs.  Telkom

Coreshares Index Tracker

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telkom

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telkom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coreshares Index and Telkom

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

The idea behind Coreshares Index Tracker and Telkom 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.