Correlation Between Telkom Indonesia and Fifth Third

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

Diversification Opportunities for Telkom Indonesia and Fifth Third

0.16

Correlation Coefficient

Telkom Indonesia  Fifth Third

Average diversification

The 3 months correlation between Telkom and Fifth is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Fifth Third go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Fifth Third

Assuming the 90 days trading horizon Telkom Indonesia is expected to generate 1.73 times less return on investment than Fifth Third. In addition to that, Telkom Indonesia is 2.95 times more volatile than Fifth Third Bancorp. It trades about 0.01 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.07 per unit of volatility. If you would invest  2,259  in Fifth Third Bancorp on December 4, 2024 and sell it today you would earn a total of  1,849  from holding Fifth Third Bancorp or generate 81.85% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Fifth Third Bancorp

Telkom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) 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.

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fifth Third is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telkom Indonesia and Fifth Third

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

The idea behind Telkom Indonesia Tbk and Fifth Third Bancorp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .