Correlation Between Telkom Indonesia and West Red
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and West Red 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 West Red 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 West Red Lake, you can compare the effects of market volatilities on Telkom Indonesia and West Red 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 West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and West Red.
Diversification Opportunities for Telkom Indonesia and West Red
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telkom and West is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake 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 West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and West Red go up and down completely randomly.
Pair Corralation between Telkom Indonesia and West Red
Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.56 times more return on investment than West Red. However, Telkom Indonesia Tbk is 1.79 times less risky than West Red. It trades about -0.02 of its potential returns per unit of risk. West Red Lake is currently generating about -0.02 per unit of risk. If you would invest 1,857 in Telkom Indonesia Tbk on September 5, 2024 and sell it today you would lose (98.00) from holding Telkom Indonesia Tbk or give up 5.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. West Red Lake
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| West Red Lake |
Telkom Indonesia and West Red Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and West Red
The main advantage of trading using opposite Telkom Indonesia and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, West Red 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 West Red will offset losses from the drop in West Red's long position.| Telkom Indonesia vs. T Mobile | Telkom Indonesia vs. Comcast Corp | Telkom Indonesia vs. Charter Communications | Telkom Indonesia vs. Vodafone Group PLC |
| West Red vs. Turning Point Brands | West Red vs. Tyson Foods | West Red vs. Fidus Investment Corp | West Red vs. Ambev SA ADR |
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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