Correlation Between Entravision Communications and Telkom Indonesia

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

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

Diversification Opportunities for Entravision Communications and Telkom Indonesia

-0.83

Correlation Coefficient

Entravision Communications  Telkom Indonesia

Pay attention - limited upside

The 3 months correlation between Entravision and Telkom is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and Entravision Communications 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 Entravision Communications are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Entravision Communications i.e., Entravision Communications and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Entravision Communications and Telkom Indonesia

Assuming the 90 days horizon Entravision Communications is expected to generate 2.47 times less return on investment than Telkom Indonesia. In addition to that, Entravision Communications is 1.2 times more volatile than Telkom Indonesia Tbk. It trades about 0.04 of its total potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.11 per unit of volatility. If you would invest  17.00  in Telkom Indonesia Tbk on October 5, 2024 and sell it today you would earn a total of  1.00  from holding Telkom Indonesia Tbk or generate 5.88% return on investment over 90 days.

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

Entravision Communications  vs.  Telkom Indonesia Tbk

Entravision Communications

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Entravision Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Entravision Communications and Telkom Indonesia

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

The idea behind Entravision Communications and Telkom Indonesia Tbk 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.