Correlation Between Telkom Indonesia and Bank Negara
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Bank Negara 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 Bank Negara 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 Bank Negara Indonesia, you can compare the effects of market volatilities on Telkom Indonesia and Bank Negara 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 Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Bank Negara.
Diversification Opportunities for Telkom Indonesia and Bank Negara
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telkom and Bank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia 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 Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Bank Negara go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Bank Negara
Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Bank Negara. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 4.08 times less risky than Bank Negara. The stock trades about -0.05 of its potential returns per unit of risk. The Bank Negara Indonesia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 441,406 in Bank Negara Indonesia on August 27, 2024 and sell it today you would earn a total of 42,594 from holding Bank Negara Indonesia or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Bank Negara Indonesia
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Bank Negara Indonesia |
Telkom Indonesia and Bank Negara Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Bank Negara
The main advantage of trading using opposite Telkom Indonesia and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Bank Negara 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 Bank Negara will offset losses from the drop in Bank Negara's long position.| Telkom Indonesia vs. Mnc Land Tbk | Telkom Indonesia vs. MNC Vision Networks | Telkom Indonesia vs. Medikaloka Hermina PT |
| Bank Negara vs. Paninvest Tbk | Bank Negara vs. Wahana Ottomitra Multiartha | Bank Negara vs. Lenox Pasifik Investama |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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