Correlation Between Telkom Indonesia and Discover Financial

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

Diversification Opportunities for Telkom Indonesia and Discover Financial

-0.55

Correlation Coefficient

Telkom Indonesia  Discover Financial

Excellent diversification

The 3 months correlation between Telkom and Discover is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Discover Financial go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Discover Financial

If you would invest  15.00  in Telkom Indonesia Tbk on May 2, 2025 and sell it today you would earn a total of  3.00  from holding Telkom Indonesia Tbk or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Discover Financial Services

Telkom Indonesia Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Discover Financial

Risk-Adjusted Performance

Solid

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Discover Financial

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

The idea behind Telkom Indonesia Tbk and Discover Financial Services 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.