Correlation Between Telkom Indonesia and CHINA TELECOM

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

Diversification Opportunities for Telkom Indonesia and CHINA TELECOM

0.08

Correlation Coefficient

Telkom Indonesia  CHINA TELECOM

Significant diversification

The 3 months correlation between Telkom and CHINA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and CHINA TELECOM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TELECOM H 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 CHINA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA TELECOM H has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and CHINA TELECOM go up and down completely randomly.

Pair Corralation between Telkom Indonesia and CHINA TELECOM

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 1.65 times more return on investment than CHINA TELECOM. However, Telkom Indonesia is 1.65 times more volatile than CHINA TELECOM H . It trades about 0.05 of its potential returns per unit of risk. CHINA TELECOM H is currently generating about 0.03 per unit of risk. If you would invest  12.00  in Telkom Indonesia Tbk on April 20, 2025 and sell it today you would earn a total of  1.00  from holding Telkom Indonesia Tbk or generate 8.33% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  CHINA TELECOM H

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.

CHINA TELECOM H

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA TELECOM H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, CHINA TELECOM may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Telkom Indonesia and CHINA TELECOM

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

The idea behind Telkom Indonesia Tbk and CHINA TELECOM H 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.