Correlation Between Singapore Telecommunicatio and Telkom Indonesia

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

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

Diversification Opportunities for Singapore Telecommunicatio and Telkom Indonesia

0.27

Correlation Coefficient

Singapore Telecommunicatio  Telkom Indonesia

Modest diversification

The 3 months correlation between Singapore and Telkom is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L 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 Singapore Telecommunicatio 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 Singapore Telecommunications 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 Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and Telkom Indonesia

Assuming the 90 days trading horizon Singapore Telecommunications Limited is expected to generate 0.36 times more return on investment than Telkom Indonesia. However, Singapore Telecommunications Limited is 2.77 times less risky than Telkom Indonesia. It trades about 0.1 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.01 per unit of risk. If you would invest  175.00  in Singapore Telecommunications Limited on September 23, 2024 and sell it today you would earn a total of  42.00  from holding Singapore Telecommunications Limited or generate 24.0% return on investment over 90 days.

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

Singapore Telecommunications L  vs.  Telkom Indonesia Tbk

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Singapore Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Singapore Telecommunicatio and Telkom Indonesia

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

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.