Correlation Between Telkom Indonesia and REA Group

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

Diversification Opportunities for Telkom Indonesia and REA Group

-0.7

Correlation Coefficient

Telkom Indonesia  REA Group

Excellent diversification

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

Pair Corralation between Telkom Indonesia and REA Group

If you would invest  10,313  in REA Group Limited on January 29, 2024 and sell it today you would earn a total of  0.00  from holding REA Group Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  REA Group Limited

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

REA Group Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REA Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, REA Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and REA Group

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

The idea behind Telkom Indonesia Tbk and REA Group Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.