Correlation Between Telkom Indonesia and Partner Communications

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

Diversification Opportunities for Telkom Indonesia and Partner Communications

0.72

Correlation Coefficient

Telkom Indonesia  Partner Communications

Poor diversification

The 3 months correlation between Telkom and Partner is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Partner Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner Communications 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 Partner Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner Communications has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Partner Communications go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Partner Communications

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.33 times more return on investment than Partner Communications. However, Telkom Indonesia Tbk is 3.0 times less risky than Partner Communications. It trades about -0.04 of its potential returns per unit of risk. Partner Communications is currently generating about -0.07 per unit of risk. If you would invest  2,210  in Telkom Indonesia Tbk on September 22, 2024 and sell it today you would lose (642.00) from holding Telkom Indonesia Tbk or give up 29.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	22.94%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Partner Communications

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 weak 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.

Partner Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Partner Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Partner Communications is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Telkom Indonesia and Partner Communications

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

The idea behind Telkom Indonesia Tbk and Partner Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.