Correlation Between Telkom Indonesia and Malacca Straits

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

Diversification Opportunities for Telkom Indonesia and Malacca Straits

-0.38
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Telkom Indonesia and Malacca Straits

If you would invest  0.14  in Malacca Straits Acquisition on September 10, 2024 and sell it today you would earn a total of  0.00  from holding Malacca Straits Acquisition or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

Telkom Indonesia Tbk  vs.  Malacca Straits Acquisition

 Performance 
       Timeline  
Telkom Indonesia Tbk 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Insignificant
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.
Malacca Straits Acqu 

Risk-Adjusted Performance

0 of 100

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

Telkom Indonesia and Malacca Straits Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telkom Indonesia and Malacca Straits

The main advantage of trading using opposite Telkom Indonesia and Malacca Straits positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Malacca Straits 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 Malacca Straits will offset losses from the drop in Malacca Straits' long position.
The idea behind Telkom Indonesia Tbk and Malacca Straits Acquisition 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.
Check out your portfolio center.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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