Correlation Between ATT and Telkom Indonesia

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

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

Diversification Opportunities for ATT and Telkom Indonesia

-0.63

Correlation Coefficient

ATT  Telkom Indonesia

Excellent diversification

The 3 months correlation between ATT and Telkom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc 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 ATT 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 ATT Inc 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 ATT i.e., ATT and Telkom Indonesia go up and down completely randomly.

Pair Corralation between ATT and Telkom Indonesia

Assuming the 90 days trading horizon ATT is expected to generate 1.32 times less return on investment than Telkom Indonesia. But when comparing it to its historical volatility, ATT Inc is 3.72 times less risky than Telkom Indonesia. It trades about 0.05 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Telkom Indonesia Tbk on September 22, 2024 and sell it today you would lose (5.00) from holding Telkom Indonesia Tbk or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

ATT Inc  vs.  Telkom Indonesia Tbk

ATT Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, ATT reported solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Very 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 January 2025.

Pair Trading with ATT and Telkom Indonesia

The main advantage of trading using opposite ATT and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.