Correlation Between Telkom Indonesia and Ecopetrol
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Ecopetrol 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 Ecopetrol 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 Ecopetrol SA ADR, you can compare the effects of market volatilities on Telkom Indonesia and Ecopetrol 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 Ecopetrol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Ecopetrol.
Diversification Opportunities for Telkom Indonesia and Ecopetrol
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telkom and Ecopetrol is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Ecopetrol SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecopetrol SA ADR 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 Ecopetrol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecopetrol SA ADR has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Ecopetrol go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Ecopetrol
Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.96 times more return on investment than Ecopetrol. However, Telkom Indonesia Tbk is 1.04 times less risky than Ecopetrol. It trades about -0.02 of its potential returns per unit of risk. Ecopetrol SA ADR is currently generating about -0.15 per unit of risk. If you would invest 1,797 in Telkom Indonesia Tbk on August 29, 2024 and sell it today you would lose (116.00) from holding Telkom Indonesia Tbk or give up 6.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Ecopetrol SA ADR
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Ecopetrol SA ADR |
Telkom Indonesia and Ecopetrol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Ecopetrol
The main advantage of trading using opposite Telkom Indonesia and Ecopetrol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Ecopetrol 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 Ecopetrol will offset losses from the drop in Ecopetrol's long position.| Telkom Indonesia vs. Liberty Broadband Srs | Telkom Indonesia vs. Cable One | Telkom Indonesia vs. Liberty Broadband Corp | Telkom Indonesia vs. Liberty Global PLC |
| Ecopetrol vs. Petroleo Brasileiro Petrobras | Ecopetrol vs. Equinor ASA ADR | Ecopetrol vs. Eni SpA ADR | Ecopetrol vs. Cenovus Energy |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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