Correlation Between Telkom Indonesia and Telecom Argentina

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

Diversification Opportunities for Telkom Indonesia and Telecom Argentina

0.79

Correlation Coefficient

Telkom Indonesia  Telecom Argentina

Poor diversification

The 3 months correlation between Telkom and Telecom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Telecom Argentina go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Telecom Argentina

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.59 times more return on investment than Telecom Argentina. However, Telkom Indonesia Tbk is 1.71 times less risky than Telecom Argentina. It trades about -0.03 of its potential returns per unit of risk. Telecom Argentina SA is currently generating about -0.02 per unit of risk. If you would invest  1,568  in Telkom Indonesia Tbk on December 20, 2024 and sell it today you would lose (87.00) from holding Telkom Indonesia Tbk or give up 5.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  Telecom Argentina SA

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 quite persistent essential indicators, Telkom Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Telecom Argentina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telecom Argentina SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Telecom Argentina is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Telkom Indonesia and Telecom Argentina

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

The idea behind Telkom Indonesia Tbk and Telecom Argentina SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.