Correlation Between Telkom Indonesia and Telefonica Brasil
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Telefonica Brasil 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 Telefonica Brasil 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 Telefonica Brasil SA, you can compare the effects of market volatilities on Telkom Indonesia and Telefonica Brasil 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 Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Telefonica Brasil.
Diversification Opportunities for Telkom Indonesia and Telefonica Brasil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telkom and Telefonica is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil 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 Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Telefonica Brasil go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Telefonica Brasil
Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Telefonica Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.2 times less risky than Telefonica Brasil. The stock trades about -0.04 of its potential returns per unit of risk. The Telefonica Brasil SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 673.00 in Telefonica Brasil SA on August 23, 2024 and sell it today you would earn a total of 198.00 from holding Telefonica Brasil SA or generate 29.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Telefonica Brasil SA
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Telefonica Brasil |
Telkom Indonesia and Telefonica Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Telefonica Brasil
The main advantage of trading using opposite Telkom Indonesia and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Telefonica Brasil 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 Telefonica Brasil will offset losses from the drop in Telefonica Brasil's long position.| Telkom Indonesia vs. Small Cap Core | Telkom Indonesia vs. FitLife Brands, Common | Telkom Indonesia vs. Mutual Of America | Telkom Indonesia vs. Gfl Environmental Holdings |
| Telefonica Brasil vs. Orange SA ADR | Telefonica Brasil vs. Vodafone Group PLC | Telefonica Brasil vs. Grupo Televisa SAB | Telefonica Brasil vs. America Movil SAB |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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