Correlation Between Telkom Indonesia and Mapfre SA

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

Diversification Opportunities for Telkom Indonesia and Mapfre SA

-0.46

Correlation Coefficient

Telkom Indonesia  Mapfre SA

Very good diversification

The 3 months correlation between Telkom and Mapfre is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Mapfre SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre SA ADR 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 Mapfre SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre SA ADR has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Mapfre SA go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Mapfre SA

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Mapfre SA. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.44 times less risky than Mapfre SA. The stock trades about -0.14 of its potential returns per unit of risk. The Mapfre SA ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  479.00  in Mapfre SA ADR on August 30, 2024 and sell it today you would earn a total of  71.00  from holding Mapfre SA ADR or generate 14.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Mapfre SA ADR

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mapfre SA ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mapfre SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Mapfre SA

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

The idea behind Telkom Indonesia Tbk and Mapfre SA ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.