Correlation Between Park Hotels and Telkom Indonesia

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Can any of the company-specific risk be diversified away by investing in both Park Hotels 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 Park Hotels and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Hotels Resorts and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Park Hotels 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 Park Hotels with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Telkom Indonesia.

Diversification Opportunities for Park Hotels and Telkom Indonesia

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Park and Telkom is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts 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 Park Hotels 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 Park Hotels Resorts 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 Park Hotels i.e., Park Hotels and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Park Hotels and Telkom Indonesia

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 0.21 times more return on investment than Telkom Indonesia. However, Park Hotels Resorts is 4.86 times less risky than Telkom Indonesia. It trades about -0.05 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.05 per unit of risk. If you would invest  1,341  in Park Hotels Resorts on October 22, 2024 and sell it today you would lose (21.00) from holding Park Hotels Resorts or give up 1.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Park Hotels Resorts  vs.  Telkom Indonesia Tbk

 Performance 
       Timeline  
Park Hotels Resorts 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Telkom Indonesia Tbk 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Park Hotels and Telkom Indonesia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Park Hotels and Telkom Indonesia

The main advantage of trading using opposite Park Hotels and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels 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 Park Hotels Resorts 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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