Correlation Between Telkom Indonesia and Assured Guaranty

Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Assured Guaranty 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 Assured Guaranty 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 Assured Guaranty, you can compare the effects of market volatilities on Telkom Indonesia and Assured Guaranty 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 Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Assured Guaranty.

Diversification Opportunities for Telkom Indonesia and Assured Guaranty

-0.59

Correlation Coefficient

Telkom Indonesia  Assured Guaranty

Excellent diversification

The 3 months correlation between Telkom and Assured is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty 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 Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Assured Guaranty go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Assured Guaranty

Assuming the 90 days trading horizon Telkom Indonesia is expected to generate 2.67 times less return on investment than Assured Guaranty. In addition to that, Telkom Indonesia is 2.5 times more volatile than Assured Guaranty. It trades about 0.02 of its total potential returns per unit of risk. Assured Guaranty is currently generating about 0.11 per unit of volatility. If you would invest  6,925  in Assured Guaranty on September 22, 2024 and sell it today you would earn a total of  1,425  from holding Assured Guaranty or generate 20.58% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Assured Guaranty

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Assured Guaranty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Assured Guaranty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Assured Guaranty

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

The idea behind Telkom Indonesia Tbk and Assured Guaranty 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 Managers module to screen money managers from public funds and ETFs managed around the world.