Correlation Between Peak Resources and Telkom Indonesia

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

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

Diversification Opportunities for Peak Resources and Telkom Indonesia

0.72

Correlation Coefficient

Peak Resources  Telkom Indonesia

Poor diversification

The 3 months correlation between Peak and Telkom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Peak Resources Limited 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 Peak Resources 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 Peak Resources Limited 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 Peak Resources i.e., Peak Resources and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Peak Resources and Telkom Indonesia

Assuming the 90 days horizon Peak Resources Limited is expected to under-perform the Telkom Indonesia. In addition to that, Peak Resources is 1.86 times more volatile than Telkom Indonesia Tbk. It trades about -0.01 of its total potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.0 per unit of volatility. If you would invest  21.00  in Telkom Indonesia Tbk on September 12, 2024 and sell it today you would lose (5.00) from holding Telkom Indonesia Tbk or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.7%
Values	Daily Returns

Peak Resources Limited  vs.  Telkom Indonesia Tbk

Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peak Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Peak Resources and Telkom Indonesia

The main advantage of trading using opposite Peak Resources and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak Resources 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 Peak Resources Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.