Correlation Between Telkom Indonesia and PT Bank

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

Diversification Opportunities for Telkom Indonesia and PT Bank

0.15

Correlation Coefficient

Telkom Indonesia  PT Bank

Average diversification

The 3 months correlation between Telkom and BKRKF is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and PT Bank go up and down completely randomly.

Pair Corralation between Telkom Indonesia and PT Bank

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the PT Bank. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 4.18 times less risky than PT Bank. The stock trades about -0.07 of its potential returns per unit of risk. The PT Bank Rakyat is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23.00  in PT Bank Rakyat on December 28, 2024 and sell it today you would earn a total of  0.00  from holding PT Bank Rakyat or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  PT Bank Rakyat

Telkom Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

PT Bank Rakyat

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and PT Bank

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

The idea behind Telkom Indonesia Tbk and PT Bank Rakyat 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.