Correlation Between Telkom Indonesia and Tesla

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

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

Diversification Opportunities for Telkom Indonesia and Tesla

-0.67

Correlation Coefficient

Telkom Indonesia  Tesla

Excellent diversification

The 3 months correlation between Telkom and Tesla is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Telkom Indonesia 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 Telkom Indonesia Tbk are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Tesla go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Tesla

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Tesla. In addition to that, Telkom Indonesia is 1.16 times more volatile than Tesla Inc. It trades about -0.06 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.32 per unit of volatility. If you would invest  33,910  in Tesla Inc on September 23, 2024 and sell it today you would earn a total of  8,515  from holding Tesla Inc or generate 25.11% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Tesla Inc

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.

Tesla Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tesla unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Tesla

The main advantage of trading using opposite Telkom Indonesia and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.

The idea behind Telkom Indonesia Tbk and Tesla Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.