Correlation Between Lighthouse Capital and Telkom

Can any of the company-specific risk be diversified away by investing in both Lighthouse Capital and Telkom 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 Lighthouse Capital and Telkom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lighthouse Capital and Telkom, you can compare the effects of market volatilities on Lighthouse Capital and Telkom 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 Lighthouse Capital with a short position of Telkom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lighthouse Capital and Telkom.

Diversification Opportunities for Lighthouse Capital and Telkom

-0.46

Correlation Coefficient

Lighthouse Capital  Telkom

Very good diversification

The 3 months correlation between Lighthouse and Telkom is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Capital and Telkom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom and Lighthouse Capital 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 Lighthouse Capital are associated (or correlated) with Telkom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom has no effect on the direction of Lighthouse Capital i.e., Lighthouse Capital and Telkom go up and down completely randomly.

Pair Corralation between Lighthouse Capital and Telkom

Assuming the 90 days trading horizon Lighthouse Capital is expected to under-perform the Telkom. But the stock apears to be less risky and, when comparing its historical volatility, Lighthouse Capital is 2.33 times less risky than Telkom. The stock trades about -0.05 of its potential returns per unit of risk. The Telkom is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  274,000  in Telkom on September 5, 2024 and sell it today you would earn a total of  65,800  from holding Telkom or generate 24.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Lighthouse Capital  vs.  Telkom

Lighthouse Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lighthouse Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lighthouse Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telkom

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telkom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lighthouse Capital and Telkom

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

The idea behind Lighthouse Capital and Telkom 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.