Correlation Between Bank of America and Telkom Indonesia
Can any of the company-specific risk be diversified away by investing in both Bank of America and Telkom Indonesia 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 Bank of America and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Bank of America and Telkom Indonesia 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 Bank of America with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Telkom Indonesia.
Diversification Opportunities for Bank of America and Telkom Indonesia
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Telkom is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and Bank of America 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 Verizon Communications are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Bank of America i.e., Bank of America and Telkom Indonesia go up and down completely randomly.
Pair Corralation between Bank of America and Telkom Indonesia
Assuming the 90 days horizon Verizon Communications is expected to generate 0.2 times more return on investment than Telkom Indonesia. However, Verizon Communications is 5.13 times less risky than Telkom Indonesia. It trades about 0.11 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.03 per unit of risk. If you would invest 3,974 in Verizon Communications on August 29, 2024 and sell it today you would earn a total of 248.00 from holding Verizon Communications or generate 6.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Verizon Communications vs. Telkom Indonesia Tbk
Performance |
| Timeline |
| Verizon Communications |
| Telkom Indonesia Tbk |
Bank of America and Telkom Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Telkom Indonesia
The main advantage of trading using opposite Bank of America and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Telkom Indonesia 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 Telkom Indonesia will offset losses from the drop in Telkom Indonesia's long position.| Bank of America vs. Entravision Communications | Bank of America vs. Citic Telecom International | Bank of America vs. AIR PRODCHEMICALS | Bank of America vs. Consolidated Communications Holdings |
| Telkom Indonesia vs. Verizon Communications | Telkom Indonesia vs. ATT Inc | Telkom Indonesia vs. ATT Inc | Telkom Indonesia vs. Deutsche Telekom AG |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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