Correlation Between Reliance Steel and Telkom Indonesia

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

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

Diversification Opportunities for Reliance Steel and Telkom Indonesia

-0.61

Correlation Coefficient

Reliance Steel  Telkom Indonesia

Excellent diversification

The 3 months correlation between Reliance and Telkom is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and Reliance Steel 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 Reliance Steel Aluminum are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Reliance Steel i.e., Reliance Steel and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Reliance Steel and Telkom Indonesia

Assuming the 90 days horizon Reliance Steel Aluminum is expected to generate 0.31 times more return on investment than Telkom Indonesia. However, Reliance Steel Aluminum is 3.18 times less risky than Telkom Indonesia. It trades about 0.09 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.02 per unit of risk. If you would invest  24,748  in Reliance Steel Aluminum on September 19, 2024 and sell it today you would earn a total of  2,972  from holding Reliance Steel Aluminum or generate 12.01% return on investment over 90 days.

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

Reliance Steel Aluminum  vs.  Telkom Indonesia Tbk

Reliance Steel Aluminum

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reliance Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Reliance Steel and Telkom Indonesia

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

The idea behind Reliance Steel Aluminum and Telkom Indonesia Tbk 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.