Correlation Between Telkom Indonesia and ABN AMRO

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

Diversification Opportunities for Telkom Indonesia and ABN AMRO

0.7

Correlation Coefficient

Telkom Indonesia  ABN AMRO

Poor diversification

The 3 months correlation between Telkom and ABN is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and ABN AMRO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN AMRO Bank 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 ABN AMRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN AMRO Bank has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and ABN AMRO go up and down completely randomly.

Pair Corralation between Telkom Indonesia and ABN AMRO

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the ABN AMRO. In addition to that, Telkom Indonesia is 2.96 times more volatile than ABN AMRO Bank. It trades about -0.06 of its total potential returns per unit of risk. ABN AMRO Bank is currently generating about 0.02 per unit of volatility. If you would invest  1,448  in ABN AMRO Bank on September 28, 2024 and sell it today you would earn a total of  6.00  from holding ABN AMRO Bank or generate 0.41% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  ABN AMRO Bank

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ABN AMRO Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABN AMRO Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Telkom Indonesia and ABN AMRO

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

The idea behind Telkom Indonesia Tbk and ABN AMRO Bank 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 Commodity Directory module to find actively traded commodities issued by global exchanges.