Correlation Between Telkom Indonesia and PayPal Holdings

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

Diversification Opportunities for Telkom Indonesia and PayPal Holdings

-0.68

Correlation Coefficient

Telkom Indonesia  PayPal Holdings

Excellent diversification

The 3 months correlation between Telkom and PayPal is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings 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 PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and PayPal Holdings go up and down completely randomly.

Pair Corralation between Telkom Indonesia and PayPal Holdings

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the PayPal Holdings. In addition to that, Telkom Indonesia is 2.97 times more volatile than PayPal Holdings. It trades about -0.04 of its total potential returns per unit of risk. PayPal Holdings is currently generating about 0.18 per unit of volatility. If you would invest  7,066  in PayPal Holdings on September 22, 2024 and sell it today you would earn a total of  1,350  from holding PayPal Holdings or generate 19.11% 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.  PayPal Holdings

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 latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PayPal Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PayPal Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PayPal Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and PayPal Holdings

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

The idea behind Telkom Indonesia Tbk and PayPal Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .