Correlation Between Telkom Indonesia and METAIR INVTS

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

Diversification Opportunities for Telkom Indonesia and METAIR INVTS

0.73

Correlation Coefficient

Telkom Indonesia  METAIR INVTS

Poor diversification

The 3 months correlation between Telkom and METAIR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and METAIR INVTS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METAIR INVTS LTD 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 METAIR INVTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METAIR INVTS LTD has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and METAIR INVTS go up and down completely randomly.

Pair Corralation between Telkom Indonesia and METAIR INVTS

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 1.99 times more return on investment than METAIR INVTS. However, Telkom Indonesia is 1.99 times more volatile than METAIR INVTS LTD. It trades about -0.02 of its potential returns per unit of risk. METAIR INVTS LTD is currently generating about -0.12 per unit of risk. If you would invest  17.00  in Telkom Indonesia Tbk on September 27, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 17.65% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  METAIR INVTS LTD

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 uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

METAIR INVTS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days METAIR INVTS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Telkom Indonesia and METAIR INVTS

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

The idea behind Telkom Indonesia Tbk and METAIR INVTS LTD 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.