Correlation Between Telkom Indonesia and Diffusion Pharmaceuticals

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

Diversification Opportunities for Telkom Indonesia and Diffusion Pharmaceuticals

0.71

Correlation Coefficient

Telkom Indonesia  Diffusion Pharmaceuticals

Poor diversification

The 3 months correlation between Telkom and Diffusion is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Diffusion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diffusion Pharmaceuticals 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 Diffusion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diffusion Pharmaceuticals has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Diffusion Pharmaceuticals go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Diffusion Pharmaceuticals

If you would invest  327.00  in Diffusion Pharmaceuticals on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Diffusion Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Diffusion Pharmaceuticals

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 conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Diffusion Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diffusion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Diffusion Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Telkom Indonesia and Diffusion Pharmaceuticals

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

The idea behind Telkom Indonesia Tbk and Diffusion Pharmaceuticals 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.