Correlation Between Telkom Indonesia and Graphic Packaging

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

Diversification Opportunities for Telkom Indonesia and Graphic Packaging

-0.62

Correlation Coefficient

Telkom Indonesia  Graphic Packaging

Excellent diversification

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

Pair Corralation between Telkom Indonesia and Graphic Packaging

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Graphic Packaging. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.32 times less risky than Graphic Packaging. The stock trades about -0.07 of its potential returns per unit of risk. The Graphic Packaging Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,714  in Graphic Packaging Holding on September 14, 2024 and sell it today you would earn a total of  71.00  from holding Graphic Packaging Holding or generate 2.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Graphic Packaging Holding

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Graphic Packaging Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphic Packaging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Graphic Packaging

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

The idea behind Telkom Indonesia Tbk and Graphic Packaging Holding 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 Stocks Directory module to find actively traded stocks across global markets.