Correlation Between STMicroelectronics and Telkom Indonesia

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

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

Diversification Opportunities for STMicroelectronics and Telkom Indonesia

0.33

Correlation Coefficient

STMicroelectronics  Telkom Indonesia

Weak diversification

The 3 months correlation between STMicroelectronics and Telkom is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV 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 STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Telkom Indonesia go up and down completely randomly.

Pair Corralation between STMicroelectronics and Telkom Indonesia

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 0.44 times more return on investment than Telkom Indonesia. However, STMicroelectronics NV is 2.29 times less risky than Telkom Indonesia. It trades about 0.25 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.05 per unit of risk. If you would invest  1,800  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  1,002  from holding STMicroelectronics NV or generate 55.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

STMicroelectronics NV  vs.  Telkom Indonesia Tbk

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telkom Indonesia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Telkom Indonesia

The main advantage of trading using opposite STMicroelectronics and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.