Correlation Between Telkom Indonesia and AAP

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

Diversification Opportunities for Telkom Indonesia and AAP

-0.35

Correlation Coefficient

Telkom Indonesia  AAP

Very good diversification

The 3 months correlation between Telkom and AAP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP 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 AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and AAP go up and down completely randomly.

Pair Corralation between Telkom Indonesia and AAP

Assuming the 90 days horizon Telkom Indonesia is expected to generate 2.18 times less return on investment than AAP. But when comparing it to its historical volatility, Telkom Indonesia Tbk is 6.85 times less risky than AAP. It trades about 0.12 of its potential returns per unit of risk. AAP Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.02  in AAP Inc on May 5, 2025 and sell it today you would lose (0.01) from holding AAP Inc or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  AAP Inc

Telkom Indonesia Tbk

Risk-Adjusted Performance

OK

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

AAP Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and AAP

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

The idea behind Telkom Indonesia Tbk and AAP 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.