Correlation Between Telkom Indonesia and Madrigal Pharmaceuticals

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

Diversification Opportunities for Telkom Indonesia and Madrigal Pharmaceuticals

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Telkom and Madrigal is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals 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 Madrigal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrigal Pharmaceuticals has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Madrigal Pharmaceuticals

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Madrigal Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 3.28 times less risky than Madrigal Pharmaceuticals. The stock trades about -0.21 of its potential returns per unit of risk. The Madrigal Pharmaceuticals is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,466  in Madrigal Pharmaceuticals on September 6, 2022 and sell it today you would earn a total of  1,550  from holding Madrigal Pharmaceuticals or generate 23.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Telkom Indonesia Tbk  vs.  Madrigal Pharmaceuticals

 Performance (%) 
       Timeline  
Telkom Indonesia Tbk 
Telkom Performance
0 of 100
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 essential indicators remain fairly strong which may send shares a bit higher in January 2023. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Telkom Price Channel

Madrigal Pharmaceuticals 
Madrigal Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Madrigal Pharmaceuticals revealed solid returns over the last few months and may actually be approaching a breakup point.

Madrigal Price Channel

Telkom Indonesia and Madrigal Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telkom Indonesia and Madrigal Pharmaceuticals

The main advantage of trading using opposite Telkom Indonesia and Madrigal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Madrigal Pharmaceuticals 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 Madrigal Pharmaceuticals will offset losses from the drop in Madrigal Pharmaceuticals' long position.
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The idea behind Telkom Indonesia Tbk and Madrigal Pharmaceuticals 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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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 CEO Directory module to screen CEOs from public companies around the world.

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