Correlation Between Telkom Indonesia and Krakatau Steel
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Krakatau Steel 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 Krakatau Steel 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 Krakatau Steel Persero, you can compare the effects of market volatilities on Telkom Indonesia and Krakatau Steel 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 Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Krakatau Steel.
Diversification Opportunities for Telkom Indonesia and Krakatau Steel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Telkom and Krakatau is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Krakatau Steel Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krakatau Steel Persero 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 Krakatau Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krakatau Steel Persero has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Krakatau Steel go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Krakatau Steel
Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 0.86 times more return on investment than Krakatau Steel. However, Telkom Indonesia Tbk is 1.16 times less risky than Krakatau Steel. It trades about -0.04 of its potential returns per unit of risk. Krakatau Steel Persero is currently generating about -0.29 per unit of risk. If you would invest 278,000 in Telkom Indonesia Tbk on September 2, 2024 and sell it today you would lose (7,000) from holding Telkom Indonesia Tbk or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Krakatau Steel Persero
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Krakatau Steel Persero |
Telkom Indonesia and Krakatau Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Krakatau Steel
The main advantage of trading using opposite Telkom Indonesia and Krakatau Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Krakatau Steel 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 Krakatau Steel will offset losses from the drop in Krakatau Steel's long position.| Telkom Indonesia vs. Astra International Tbk | Telkom Indonesia vs. Bank Rakyat Indonesia | Telkom Indonesia vs. Bank Mandiri Persero | Telkom Indonesia vs. Bank Central Asia |
| Krakatau Steel vs. Perusahaan Gas Negara | Krakatau Steel vs. Telkom Indonesia Tbk | Krakatau Steel vs. Mitra Pinasthika Mustika | Krakatau Steel vs. Jakarta Int Hotels |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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