Correlation Between Telkom Indonesia and KeyCorp

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

Diversification Opportunities for Telkom Indonesia and KeyCorp

-0.64

Correlation Coefficient

Telkom Indonesia  KeyCorp

Excellent diversification

The 3 months correlation between Telkom and KeyCorp is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and KeyCorp go up and down completely randomly.

Pair Corralation between Telkom Indonesia and KeyCorp

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 7.38 times more return on investment than KeyCorp. However, Telkom Indonesia is 7.38 times more volatile than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about -0.17 per unit of risk. If you would invest  14.00  in Telkom Indonesia Tbk on September 19, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  KeyCorp

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. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

KeyCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KeyCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and KeyCorp

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

The idea behind Telkom Indonesia Tbk and KeyCorp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.