Correlation Between Telkom Indonesia and Brown Brown

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

Diversification Opportunities for Telkom Indonesia and Brown Brown

-0.48

Correlation Coefficient

Telkom Indonesia  Brown Brown

Very good diversification

The 3 months correlation between Telkom and Brown is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown 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 Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Brown Brown go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Brown Brown

Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to generate 6.19 times more return on investment than Brown Brown. However, Telkom Indonesia is 6.19 times more volatile than Brown Brown. It trades about 0.04 of its potential returns per unit of risk. Brown Brown is currently generating about 0.05 per unit of risk. If you would invest  17.00  in Telkom Indonesia Tbk on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Telkom Indonesia Tbk or generate 0.0% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Brown Brown

Telkom Indonesia Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, Telkom Indonesia reported solid returns over the last few months and may actually be approaching a breakup point.

Brown Brown

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Brown Brown is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telkom Indonesia and Brown Brown

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

The idea behind Telkom Indonesia Tbk and Brown Brown 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.