Correlation Between Telkom Indonesia and GBank Financial

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

Diversification Opportunities for Telkom Indonesia and GBank Financial

-0.82

Correlation Coefficient

Telkom Indonesia  GBank Financial

Pay attention - limited upside

The 3 months correlation between Telkom and GBank is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and GBank Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBank Financial Holdings 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 GBank Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBank Financial Holdings has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and GBank Financial go up and down completely randomly.

Pair Corralation between Telkom Indonesia and GBank Financial

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the GBank Financial. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.45 times less risky than GBank Financial. The stock trades about -0.12 of its potential returns per unit of risk. The GBank Financial Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,885  in GBank Financial Holdings on September 27, 2024 and sell it today you would earn a total of  585.00  from holding GBank Financial Holdings or generate 20.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  GBank Financial Holdings

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. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GBank Financial Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBank Financial Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, GBank Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and GBank Financial

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

The idea behind Telkom Indonesia Tbk and GBank Financial Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .