Correlation Between Citic Telecom and Telkom Indonesia

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

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

Diversification Opportunities for Citic Telecom and Telkom Indonesia

-0.46

Correlation Coefficient

Citic Telecom  Telkom Indonesia

Very good diversification

The 3 months correlation between Citic and Telkom is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International 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 Citic 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 Citic Telecom International 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 Citic Telecom i.e., Citic Telecom and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Citic Telecom and Telkom Indonesia

Assuming the 90 days trading horizon Citic Telecom International is expected to generate 1.4 times more return on investment than Telkom Indonesia. However, Citic Telecom is 1.4 times more volatile than Telkom Indonesia Tbk. It trades about 0.08 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.02 per unit of risk. If you would invest  3.89  in Citic Telecom International on September 14, 2024 and sell it today you would earn a total of  23.11  from holding Citic Telecom International or generate 594.09% return on investment over 90 days.

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

Citic Telecom International  vs.  Telkom Indonesia Tbk

Citic Telecom Intern

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Telecom International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Citic Telecom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citic Telecom and Telkom Indonesia

The main advantage of trading using opposite Citic Telecom and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom 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 Citic Telecom International 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.