Correlation Between ETFS Coffee and Telkom Indonesia

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

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

Diversification Opportunities for ETFS Coffee and Telkom Indonesia

-0.49

Correlation Coefficient

ETFS Coffee  Telkom Indonesia

Very good diversification

The 3 months correlation between ETFS and Telkom is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC 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 ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and Telkom Indonesia go up and down completely randomly.

Pair Corralation between ETFS Coffee and Telkom Indonesia

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 0.51 times more return on investment than Telkom Indonesia. However, ETFS Coffee ETC is 1.94 times less risky than Telkom Indonesia. It trades about 0.19 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.03 per unit of risk. If you would invest  3,920  in ETFS Coffee ETC on September 14, 2024 and sell it today you would earn a total of  1,319  from holding ETFS Coffee ETC or generate 33.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

ETFS Coffee ETC  vs.  Telkom Indonesia Tbk

ETFS Coffee ETC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ETFS Coffee and Telkom Indonesia

The main advantage of trading using opposite ETFS Coffee and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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 ETFS Coffee ETC 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 Transaction History module to view history of all your transactions and understand their impact on performance.