Correlation Between Telkom Indonesia and Eli Lilly

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

Diversification Opportunities for Telkom Indonesia and Eli Lilly

0.68
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Telkom Indonesia and Eli Lilly

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 2.73 times more return on investment than Eli Lilly. However, Telkom Indonesia is 2.73 times more volatile than Eli Lilly and. It trades about -0.02 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.09 per unit of risk. If you would invest  18.00  in Telkom Indonesia Tbk on September 1, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 16.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.48%
ValuesDaily Returns

Telkom Indonesia Tbk  vs.  Eli Lilly and

 Performance 
       Timeline  
Telkom Indonesia Tbk 

Risk-Adjusted Performance

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Weak
 
Strong
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 uncertain 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.
Eli Lilly 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telkom Indonesia and Eli Lilly Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telkom Indonesia and Eli Lilly

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

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