Correlation Between Telkom Indonesia and EFFECTOR Therapeutics

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

Diversification Opportunities for Telkom Indonesia and EFFECTOR Therapeutics

-0.45

Correlation Coefficient

Telkom Indonesia  EFFECTOR Therapeutics

Very good diversification

The 3 months correlation between Telkom and EFFECTOR is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and EFFECTOR Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFFECTOR Therapeutics 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 EFFECTOR Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFFECTOR Therapeutics has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and EFFECTOR Therapeutics go up and down completely randomly.

Pair Corralation between Telkom Indonesia and EFFECTOR Therapeutics

If you would invest  18.00  in Telkom Indonesia Tbk on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Telkom Indonesia Tbk or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  EFFECTOR Therapeutics

Telkom Indonesia Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EFFECTOR Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EFFECTOR Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EFFECTOR Therapeutics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Telkom Indonesia and EFFECTOR Therapeutics

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

The idea behind Telkom Indonesia Tbk and EFFECTOR Therapeutics 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.