Correlation Between Telkom Indonesia and Zijin Mining

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

Diversification Opportunities for Telkom Indonesia and Zijin Mining

0.28

Correlation Coefficient

Telkom Indonesia  Zijin Mining

Modest diversification

The 3 months correlation between Telkom and Zijin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group 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 Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Zijin Mining go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Zijin Mining

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 3.4 times less risky than Zijin Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Zijin Mining Group on September 3, 2024 and sell it today you would earn a total of  8.00  from holding Zijin Mining Group or generate 4.73% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Zijin Mining Group

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.

Zijin Mining Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zijin Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telkom Indonesia and Zijin Mining

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

The idea behind Telkom Indonesia Tbk and Zijin Mining Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.