Correlation Between Telkom and Blue Label

Can any of the company-specific risk be diversified away by investing in both Telkom and Blue Label 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 and Blue Label into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telkom and Blue Label Telecoms, you can compare the effects of market volatilities on Telkom and Blue Label 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 with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom and Blue Label.

Diversification Opportunities for Telkom and Blue Label

0.0

Correlation Coefficient

Telkom  Blue Label

Pay attention - limited upside

The 3 months correlation between Telkom and Blue is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Telkom and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms and Telkom 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 are associated (or correlated) with Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of Telkom i.e., Telkom and Blue Label go up and down completely randomly.

Pair Corralation between Telkom and Blue Label

Assuming the 90 days trading horizon Telkom is expected to generate 1.11 times more return on investment than Blue Label. However, Telkom is 1.11 times more volatile than Blue Label Telecoms. It trades about 0.23 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.14 per unit of risk. If you would invest  265,300  in Telkom on September 4, 2024 and sell it today you would earn a total of  74,500  from holding Telkom or generate 28.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Telkom  vs.  Blue Label Telecoms

Telkom

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Telkom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Label Telecoms

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom and Blue Label

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

The idea behind Telkom and Blue Label Telecoms 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.