Correlation Between Telkom Indonesia and Summit Hotel

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

Diversification Opportunities for Telkom Indonesia and Summit Hotel

-0.35

Correlation Coefficient

Telkom Indonesia  Summit Hotel

Very good diversification

The 3 months correlation between Telkom and Summit is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Summit Hotel go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Summit Hotel

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 4.46 times more return on investment than Summit Hotel. However, Telkom Indonesia is 4.46 times more volatile than Summit Hotel Properties. It trades about 0.03 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.07 per unit of risk. If you would invest  15.00  in Telkom Indonesia Tbk on October 8, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Summit Hotel Properties

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Summit Hotel Properties

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Telkom Indonesia and Summit Hotel

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

The idea behind Telkom Indonesia Tbk and Summit Hotel Properties 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.