Correlation Between Telkom Indonesia and Sabra Health

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

Diversification Opportunities for Telkom Indonesia and Sabra Health

-0.58

Correlation Coefficient

Telkom Indonesia  Sabra Health

Excellent diversification

The 3 months correlation between Telkom and Sabra is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care 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 Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Sabra Health go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Sabra Health

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Sabra Health. In addition to that, Telkom Indonesia is 3.23 times more volatile than Sabra Health Care. It trades about -0.02 of its total potential returns per unit of risk. Sabra Health Care is currently generating about 0.15 per unit of volatility. If you would invest  1,502  in Sabra Health Care on September 2, 2024 and sell it today you would earn a total of  279.00  from holding Sabra Health Care or generate 18.58% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Sabra Health Care

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.

Sabra Health Care

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sabra Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Sabra Health

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

The idea behind Telkom Indonesia Tbk and Sabra Health Care 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.