Correlation Between Verizon Communications and Telkom Indonesia

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Telkom Indonesia 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 Verizon Communications and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Verizon Communications and Telkom Indonesia 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 Verizon Communications with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Telkom Indonesia.

Diversification Opportunities for Verizon Communications and Telkom Indonesia

-0.03

Correlation Coefficient

Verizon Communications  Telkom Indonesia

Good diversification

The 3 months correlation between Verizon and Telkom is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and Verizon Communications 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 Verizon Communications are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Verizon Communications i.e., Verizon Communications and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Verizon Communications and Telkom Indonesia

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.84 times less return on investment than Telkom Indonesia. But when comparing it to its historical volatility, Verizon Communications is 2.76 times less risky than Telkom Indonesia. It trades about 0.06 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Verizon Communications  vs.  Telkom Indonesia Tbk

Verizon Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Verizon Communications and Telkom Indonesia

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

The idea behind Verizon Communications and Telkom Indonesia Tbk 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.