Correlation Between RETAIL FOOD and Telkom Indonesia

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

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

Diversification Opportunities for RETAIL FOOD and Telkom Indonesia

-0.79

Correlation Coefficient

RETAIL FOOD  Telkom Indonesia

Pay attention - limited upside

The 3 months correlation between RETAIL and Telkom is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP 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 RETAIL FOOD 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 RETAIL FOOD GROUP 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 RETAIL FOOD i.e., RETAIL FOOD and Telkom Indonesia go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Telkom Indonesia

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 2.08 times more return on investment than Telkom Indonesia. However, RETAIL FOOD is 2.08 times more volatile than Telkom Indonesia Tbk. It trades about 0.01 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.04 per unit of risk. If you would invest  4.05  in RETAIL FOOD GROUP on September 12, 2024 and sell it today you would lose (0.15) from holding RETAIL FOOD GROUP or give up 3.7% of portfolio value over 90 days.

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

RETAIL FOOD GROUP  vs.  Telkom Indonesia Tbk

RETAIL FOOD GROUP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RETAIL FOOD and Telkom Indonesia

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

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.