Correlation Between PENN NATL and Telkom Indonesia

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

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

Diversification Opportunities for PENN NATL and Telkom Indonesia

0.05

Correlation Coefficient

PENN NATL  Telkom Indonesia

Significant diversification

The 3 months correlation between PENN and Telkom is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING 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 PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Telkom Indonesia go up and down completely randomly.

Pair Corralation between PENN NATL and Telkom Indonesia

Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 0.76 times more return on investment than Telkom Indonesia. However, PENN NATL GAMING is 1.31 times less risky than Telkom Indonesia. It trades about 0.03 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.01 per unit of risk. If you would invest  1,829  in PENN NATL GAMING on October 27, 2024 and sell it today you would earn a total of  58.00  from holding PENN NATL GAMING or generate 3.17% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Telkom Indonesia Tbk

PENN NATL GAMING

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PENN NATL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound technical and fundamental indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PENN NATL and Telkom Indonesia

The main advantage of trading using opposite PENN NATL and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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 PENN NATL GAMING 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.