Correlation Between Telkom Indonesia and China Southern
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and China Southern 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 China Southern 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 China Southern Airlines, you can compare the effects of market volatilities on Telkom Indonesia and China Southern 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 China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and China Southern.
Diversification Opportunities for Telkom Indonesia and China Southern
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Telkom and China is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and China Southern go up and down completely randomly.
Pair Corralation between Telkom Indonesia and China Southern
Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the China Southern. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.1 times less risky than China Southern. The stock trades about -0.17 of its potential returns per unit of risk. The China Southern Airlines is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 40.00 in China Southern Airlines on August 30, 2024 and sell it today you would earn a total of 6.00 from holding China Southern Airlines or generate 15.0% 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. China Southern Airlines
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| China Southern Airlines |
Telkom Indonesia and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and China Southern
The main advantage of trading using opposite Telkom Indonesia and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern's long position.| Telkom Indonesia vs. T Mobile | Telkom Indonesia vs. Comcast Corp | Telkom Indonesia vs. Charter Communications | Telkom Indonesia vs. Vodafone Group PLC |
| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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