Correlation Between Telkom Indonesia and Six Flags

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

Diversification Opportunities for Telkom Indonesia and Six Flags

0.37

Correlation Coefficient

Telkom Indonesia  Six Flags

Weak diversification

The 3 months correlation between Telkom and Six is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Six Flags go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Six Flags

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Six Flags. In addition to that, Telkom Indonesia is 1.06 times more volatile than Six Flags Entertainment. It trades about -0.04 of its total potential returns per unit of risk. Six Flags Entertainment is currently generating about 0.01 per unit of volatility. If you would invest  4,619  in Six Flags Entertainment on November 28, 2024 and sell it today you would lose (2.00) from holding Six Flags Entertainment or give up 0.04% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Six Flags Entertainment

Telkom Indonesia Tbk

Risk-Adjusted Performance

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 quite persistent essential indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Six Flags Entertainment

Risk-Adjusted Performance

Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Six Flags is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Telkom Indonesia and Six Flags

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

The idea behind Telkom Indonesia Tbk and Six Flags Entertainment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.