Correlation Between Bank Rakyat and Telkom Indonesia
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat 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 Rakyat and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Bank Rakyat 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 Rakyat with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Telkom Indonesia.
Diversification Opportunities for Bank Rakyat and Telkom Indonesia
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Telkom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat 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 Rakyat 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 Bank Rakyat 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 Rakyat i.e., Bank Rakyat and Telkom Indonesia go up and down completely randomly.
Pair Corralation between Bank Rakyat and Telkom Indonesia
Assuming the 90 days horizon Bank Rakyat is expected to generate 2.01 times less return on investment than Telkom Indonesia. But when comparing it to its historical volatility, Bank Rakyat is 2.02 times less risky than Telkom Indonesia. It trades about 0.02 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Telkom Indonesia Tbk on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Telkom Indonesia Tbk or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Rakyat vs. Telkom Indonesia Tbk
Performance |
| Timeline |
| Bank Rakyat |
| Telkom Indonesia Tbk |
Bank Rakyat and Telkom Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and Telkom Indonesia
The main advantage of trading using opposite Bank Rakyat and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat 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 Rakyat vs. Israel Discount Bank | Bank Rakyat vs. Baraboo Bancorporation | Bank Rakyat vs. Danske Bank AS | Bank Rakyat vs. Jyske Bank AS |
| Telkom Indonesia vs. Vodafone Group PLC | Telkom Indonesia vs. KDDI Corp | Telkom Indonesia vs. Amrica Mvil, SAB | Telkom Indonesia vs. Singapore Telecommunications Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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