Correlation Between Telkom Indonesia and Edwards Lifesciences

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

Diversification Opportunities for Telkom Indonesia and Edwards Lifesciences

0.02

Correlation Coefficient

Telkom Indonesia  Edwards Lifesciences

Significant diversification

The 3 months correlation between Telkom and Edwards is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Edwards Lifesciences

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Edwards Lifesciences. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.76 times less risky than Edwards Lifesciences. The stock trades about -0.03 of its potential returns per unit of risk. The Edwards Lifesciences Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,275  in Edwards Lifesciences Corp on June 29, 2024 and sell it today you would lose (1,698) from holding Edwards Lifesciences Corp or give up 20.52% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Edwards Lifesciences Corp

Telkom Indonesia Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Edwards Lifesciences Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edwards Lifesciences Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Telkom Indonesia and Edwards Lifesciences

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

The idea behind Telkom Indonesia Tbk and Edwards Lifesciences Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.