Correlation Between WILLIS LEASE and Telkom Indonesia

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

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

Diversification Opportunities for WILLIS LEASE and Telkom Indonesia

-0.62

Correlation Coefficient

WILLIS LEASE  Telkom Indonesia

Excellent diversification

The 3 months correlation between WILLIS and Telkom is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN 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 WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Telkom Indonesia go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Telkom Indonesia

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 3.86 times more return on investment than Telkom Indonesia. However, WILLIS LEASE is 3.86 times more volatile than Telkom Indonesia Tbk. It trades about 0.25 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.07 per unit of risk. If you would invest  9,838  in WILLIS LEASE FIN on September 12, 2024 and sell it today you would earn a total of  9,162  from holding WILLIS LEASE FIN or generate 93.13% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  Telkom Indonesia Tbk

WILLIS LEASE FIN

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WILLIS LEASE and Telkom Indonesia

The main advantage of trading using opposite WILLIS LEASE and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.