Correlation Between Telkom Indonesia and Bank Mandiri

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

Diversification Opportunities for Telkom Indonesia and Bank Mandiri

0.75

Correlation Coefficient

Telkom Indonesia  Bank Mandiri

Poor diversification

The 3 months correlation between Telkom and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Bank Mandiri Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mandiri Persero 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 Bank Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mandiri Persero has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Bank Mandiri go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Bank Mandiri

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Bank Mandiri. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.28 times less risky than Bank Mandiri. The stock trades about -0.05 of its potential returns per unit of risk. The Bank Mandiri Persero is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,245  in Bank Mandiri Persero on November 19, 2024 and sell it today you would earn a total of  28.00  from holding Bank Mandiri Persero or generate 2.25% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Bank Mandiri Persero

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.

Bank Mandiri Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Mandiri Persero has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telkom Indonesia and Bank Mandiri

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

The idea behind Telkom Indonesia Tbk and Bank Mandiri Persero 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.