Correlation Between British American and Telkom Indonesia
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Telkom Indonesia Tbk, you can compare the effects of market volatilities on British American 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 British American with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Telkom Indonesia.
Diversification Opportunities for British American and Telkom Indonesia
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Telkom is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco 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 British American 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 British American Tobacco 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 British American i.e., British American and Telkom Indonesia go up and down completely randomly.
Pair Corralation between British American and Telkom Indonesia
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.13 times more return on investment than Telkom Indonesia. However, British American Tobacco is 7.93 times less risky than Telkom Indonesia. It trades about 0.69 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.01 per unit of risk. If you would invest 3,208 in British American Tobacco on August 30, 2024 and sell it today you would earn a total of 393.00 from holding British American Tobacco or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Telkom Indonesia Tbk
Performance |
| Timeline |
| British American Tobacco |
| Telkom Indonesia Tbk |
British American and Telkom Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Telkom Indonesia
The main advantage of trading using opposite British American and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Superior Plus Corp | British American vs. NMI Holdings | British American vs. SIVERS SEMICONDUCTORS AB | British American vs. Talanx AG |
| Telkom Indonesia vs. Hanison Construction Holdings | Telkom Indonesia vs. British American Tobacco | Telkom Indonesia vs. Japan Tobacco | 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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