Correlation Between PT Bank and Telecom Italia

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Can any of the company-specific risk be diversified away by investing in both PT Bank and Telecom Italia 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 PT Bank and Telecom Italia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Rakyat and Telecom Italia SpA, you can compare the effects of market volatilities on PT Bank and Telecom Italia 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 PT Bank with a short position of Telecom Italia. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Telecom Italia.

Diversification Opportunities for PT Bank and Telecom Italia

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between BKRKF and Telecom is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA and PT Bank 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 PT Bank Rakyat are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of PT Bank i.e., PT Bank and Telecom Italia go up and down completely randomly.

Pair Corralation between PT Bank and Telecom Italia

If you would invest  26.00  in PT Bank Rakyat on September 1, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 3.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

PT Bank Rakyat  vs.  Telecom Italia SpA

 Performance 
       Timeline  
PT Bank Rakyat 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PT Bank Rakyat 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 forward-looking signals remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Telecom Italia SpA 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Telecom Italia may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PT Bank and Telecom Italia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PT Bank and Telecom Italia

The main advantage of trading using opposite PT Bank and Telecom Italia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Telecom Italia 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 Italia will offset losses from the drop in Telecom Italia's long position.
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The idea behind PT Bank Rakyat and Telecom Italia SpA 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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