Correlation Between Telkom Indonesia and CDL INVESTMENT

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

Diversification Opportunities for Telkom Indonesia and CDL INVESTMENT

-0.44

Correlation Coefficient

Telkom Indonesia  CDL INVESTMENT

Very good diversification

The 3 months correlation between Telkom and CDL is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT 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 CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and CDL INVESTMENT go up and down completely randomly.

Pair Corralation between Telkom Indonesia and CDL INVESTMENT

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the CDL INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.03 times less risky than CDL INVESTMENT. The stock trades about -0.22 of its potential returns per unit of risk. The CDL INVESTMENT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  36.00  in CDL INVESTMENT on February 28, 2024 and sell it today you would earn a total of  2.00  from holding CDL INVESTMENT or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  CDL INVESTMENT

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CDL INVESTMENT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CDL INVESTMENT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CDL INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Telkom Indonesia and CDL INVESTMENT

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

The idea behind Telkom Indonesia Tbk and CDL INVESTMENT 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.