Correlation Between Telkom Indonesia and Euro Sun

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

Diversification Opportunities for Telkom Indonesia and Euro Sun

-0.69

Correlation Coefficient

Telkom Indonesia  Euro Sun

Excellent diversification

The 3 months correlation between Telkom and Euro is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Euro Sun Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Sun Mining 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 Euro Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Sun Mining has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Euro Sun go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Euro Sun

Assuming the 90 days horizon Telkom Indonesia Tbk is expected to under-perform the Euro Sun. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 5.03 times less risky than Euro Sun. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Euro Sun Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.70  in Euro Sun Mining on February 16, 2024 and sell it today you would earn a total of  0.63  from holding Euro Sun Mining or generate 17.03% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Euro Sun Mining

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 weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Euro Sun Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Sun Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Euro Sun reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Euro Sun

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

The idea behind Telkom Indonesia Tbk and Euro Sun Mining 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.