Correlation Between Telkom Indonesia and Innovative Payment

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

Diversification Opportunities for Telkom Indonesia and Innovative Payment

-0.34

Correlation Coefficient

Telkom Indonesia  Innovative Payment

Very good diversification

The 3 months correlation between Telkom and Innovative is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Innovative Payment Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Payment 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 Innovative Payment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Payment has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Innovative Payment go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Innovative Payment

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Innovative Payment. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 6.32 times less risky than Innovative Payment. The stock trades about -0.15 of its potential returns per unit of risk. The Innovative Payment Solutions is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Innovative Payment Solutions on September 17, 2024 and sell it today you would lose (3.00) from holding Innovative Payment Solutions or give up 30.0% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Innovative Payment Solutions

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 uncertain 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.

Innovative Payment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Innovative Payment Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Innovative Payment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Telkom Indonesia and Innovative Payment

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

The idea behind Telkom Indonesia Tbk and Innovative Payment Solutions 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.