Correlation Between PT Bank and Telkom Indonesia

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

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

Diversification Opportunities for PT Bank and Telkom Indonesia

0.51

Correlation Coefficient

PT Bank  Telkom Indonesia

Very weak diversification

The 3 months correlation between BZG2 and Telkom is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central 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 PT Bank 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 PT Bank Central 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 PT Bank i.e., PT Bank and Telkom Indonesia go up and down completely randomly.

Pair Corralation between PT Bank and Telkom Indonesia

Assuming the 90 days trading horizon PT Bank Central is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Central is 2.03 times less risky than Telkom Indonesia. The stock trades about -0.08 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Telkom Indonesia Tbk on December 20, 2024 and sell it today you would lose (2.00) from holding Telkom Indonesia Tbk or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

PT Bank Central  vs.  Telkom Indonesia Tbk

PT Bank Central

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Central 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Telkom Indonesia Tbk

Risk-Adjusted Performance

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 fragile forward indicators, Telkom Indonesia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PT Bank and Telkom Indonesia

The main advantage of trading using opposite PT Bank and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Central 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.