Correlation Between ATN International and Telkom Indonesia

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

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

Diversification Opportunities for ATN International and Telkom Indonesia

0.21

Correlation Coefficient

ATN International  Telkom Indonesia

Modest diversification

The 3 months correlation between ATN and Telkom is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ATN International 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 ATN International 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 ATN International 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 ATN International i.e., ATN International and Telkom Indonesia go up and down completely randomly.

Pair Corralation between ATN International and Telkom Indonesia

Given the investment horizon of 90 days ATN International is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, ATN International is 1.75 times less risky than Telkom Indonesia. The stock trades about -0.62 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Telkom Indonesia Tbk on September 23, 2024 and sell it today you would lose (3.00) from holding Telkom Indonesia Tbk or give up 15.79% of portfolio value over 90 days.

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

ATN International  vs.  Telkom Indonesia Tbk

ATN International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATN International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ATN International and Telkom Indonesia

The main advantage of trading using opposite ATN International and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATN International 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 ATN International 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.