Correlation Between Telkom Indonesia and General Mills

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

Diversification Opportunities for Telkom Indonesia and General Mills

-0.62

Correlation Coefficient

Telkom Indonesia  General Mills

Excellent diversification

The 3 months correlation between Telkom and General is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and General Mills go up and down completely randomly.

Pair Corralation between Telkom Indonesia and General Mills

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the General Mills. In addition to that, Telkom Indonesia is 4.3 times more volatile than General Mills. It trades about -0.01 of its total potential returns per unit of risk. General Mills is currently generating about 0.18 per unit of volatility. If you would invest  7,458  in General Mills on September 18, 2024 and sell it today you would earn a total of  1,399  from holding General Mills or generate 18.76% 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.  General Mills

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. Despite nearly stable forward indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

General Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Mills unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and General Mills

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

The idea behind Telkom Indonesia Tbk and General Mills 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.