Correlation Between Telkom Indonesia and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on Telkom Indonesia and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Norsk Hydro.
Diversification Opportunities for Telkom Indonesia and Norsk Hydro
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telkom and Norsk is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Norsk Hydro go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Norsk Hydro
Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Norsk Hydro. In addition to that, Telkom Indonesia is 1.76 times more volatile than Norsk Hydro ASA. It trades about -0.02 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.14 per unit of volatility. If you would invest 569.00 in Norsk Hydro ASA on August 28, 2024 and sell it today you would earn a total of 53.00 from holding Norsk Hydro ASA or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Norsk Hydro ASA
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Norsk Hydro ASA |
Telkom Indonesia and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Norsk Hydro
The main advantage of trading using opposite Telkom Indonesia and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.The idea behind Telkom Indonesia Tbk and Norsk Hydro ASA 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.| Norsk Hydro vs. MAGIC SOFTWARE ENTR | Norsk Hydro vs. COMINTL BANK ADR1 | Norsk Hydro vs. National Bank Holdings | Norsk Hydro vs. Commonwealth Bank of |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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