Correlation Between Telkom Indonesia and Tesla

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

Diversification Opportunities for Telkom Indonesia and Tesla

-0.68

Correlation Coefficient

Telkom Indonesia  Tesla

Excellent diversification

The 3 months correlation between Telkom and Tesla is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Tesla go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Tesla

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.07 times less risky than Tesla. The stock trades about -0.06 of its potential returns per unit of risk. The Tesla Inc is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  24,935  in Tesla Inc on September 27, 2024 and sell it today you would earn a total of  16,510  from holding Tesla Inc or generate 66.21% 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.  Tesla Inc

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. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tesla unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Tesla

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

The idea behind Telkom Indonesia Tbk and Tesla Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.