Correlation Between PT Indosat and Liberty Broadband

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

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

Diversification Opportunities for PT Indosat and Liberty Broadband

0.38

Correlation Coefficient

PT Indosat  Liberty Broadband

Weak diversification

The 3 months correlation between PTITF and Liberty is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs and PT Indosat 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 Indosat Tbk are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of PT Indosat i.e., PT Indosat and Liberty Broadband go up and down completely randomly.

Pair Corralation between PT Indosat and Liberty Broadband

Assuming the 90 days horizon PT Indosat Tbk is expected to generate 17.53 times more return on investment than Liberty Broadband. However, PT Indosat is 17.53 times more volatile than Liberty Broadband Srs. It trades about 0.12 of its potential returns per unit of risk. Liberty Broadband Srs is currently generating about 0.03 per unit of risk. If you would invest  16.00  in PT Indosat Tbk on October 2, 2024 and sell it today you would earn a total of  0.00  from holding PT Indosat Tbk or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.63%
Values	Daily Returns

PT Indosat Tbk  vs.  Liberty Broadband Srs

PT Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indosat Tbk 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Liberty Broadband Srs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Broadband Srs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PT Indosat and Liberty Broadband

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

The idea behind PT Indosat Tbk and Liberty Broadband Srs 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.