Correlation Between Telkom Indonesia and Gol Linhas

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

Diversification Opportunities for Telkom Indonesia and Gol Linhas

0.7

Correlation Coefficient

Telkom Indonesia  Gol Linhas

Poor diversification

The 3 months correlation between Telkom and Gol is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Gol Linhas Aereas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Aereas 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 Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Aereas has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Gol Linhas go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Gol Linhas

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.23 times more return on investment than Gol Linhas. However, Telkom Indonesia Tbk is 4.4 times less risky than Gol Linhas. It trades about -0.04 of its potential returns per unit of risk. Gol Linhas Aereas is currently generating about -0.04 per unit of risk. If you would invest  2,671  in Telkom Indonesia Tbk on February 6, 2024 and sell it today you would lose (746.00) from holding Telkom Indonesia Tbk or give up 27.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.1%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Gol Linhas Aereas

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. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Gol Linhas Aereas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gol Linhas Aereas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Gol Linhas is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Telkom Indonesia and Gol Linhas

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

The idea behind Telkom Indonesia Tbk and Gol Linhas Aereas 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.