Correlation Between Telkom Indonesia and Morgan Stanley

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

Diversification Opportunities for Telkom Indonesia and Morgan Stanley

-0.56

Correlation Coefficient

Telkom Indonesia  Morgan Stanley

Excellent diversification

The 3 months correlation between Telkom and Morgan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Morgan Stanley go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Morgan Stanley

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 7.98 times more return on investment than Morgan Stanley. However, Telkom Indonesia is 7.98 times more volatile than Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.03 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Telkom Indonesia Tbk or generate 0.0% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Morgan Stanley

Telkom Indonesia Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Morgan Stanley exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Morgan Stanley

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

The idea behind Telkom Indonesia Tbk and Morgan Stanley 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.