Correlation Between Algorand and Telkom SA

Can any of the company-specific risk be diversified away by investing in both Algorand and Telkom SA 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 Algorand and Telkom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algorand and Telkom SA SOC, you can compare the effects of market volatilities on Algorand and Telkom SA 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 Algorand with a short position of Telkom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Telkom SA.

Diversification Opportunities for Algorand and Telkom SA

0.9

Correlation Coefficient

Algorand  Telkom SA

Almost no diversification

The 3 months correlation between Algorand and Telkom is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Telkom SA SOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom SA SOC and Algorand 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 Algorand are associated (or correlated) with Telkom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom SA SOC has no effect on the direction of Algorand i.e., Algorand and Telkom SA go up and down completely randomly.

Pair Corralation between Algorand and Telkom SA

Assuming the 90 days trading horizon Algorand is expected to generate 3.11 times more return on investment than Telkom SA. However, Algorand is 3.11 times more volatile than Telkom SA SOC. It trades about -0.02 of its potential returns per unit of risk. Telkom SA SOC is currently generating about -0.22 per unit of risk. If you would invest  42.00  in Algorand on October 9, 2024 and sell it today you would lose (4.00) from holding Algorand or give up 9.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	80.95%
Values	Daily Returns

Algorand  vs.  Telkom SA SOC

Algorand

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Algorand exhibited solid returns over the last few months and may actually be approaching a breakup point.

Telkom SA SOC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom SA SOC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Telkom SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algorand and Telkom SA

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

The idea behind Algorand and Telkom SA SOC 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 Stocks Directory module to find actively traded stocks across global markets.