Correlation Between Telkom Indonesia and American Sierra

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

Diversification Opportunities for Telkom Indonesia and American Sierra

-0.38

Correlation Coefficient

Telkom Indonesia  American Sierra

Very good diversification

The 3 months correlation between Telkom and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and American Sierra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Sierra Gold 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 American Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Sierra Gold has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and American Sierra go up and down completely randomly.

Pair Corralation between Telkom Indonesia and American Sierra

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the American Sierra. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 7.46 times less risky than American Sierra. The pink sheet trades about -0.03 of its potential returns per unit of risk. The American Sierra Gold is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.00  in American Sierra Gold on September 25, 2024 and sell it today you would lose (0.50) from holding American Sierra Gold or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.73%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  American Sierra Gold

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Sierra Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and American Sierra

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

The idea behind Telkom Indonesia Tbk and American Sierra Gold 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.