Correlation Between Telkom Indonesia and Buyung Poetra
Can any of the company-specific risk be diversified away by investing in both Telkom Indonesia and Buyung Poetra 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 Buyung Poetra 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 Buyung Poetra Sembada, you can compare the effects of market volatilities on Telkom Indonesia and Buyung Poetra 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 Buyung Poetra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telkom Indonesia and Buyung Poetra.
Diversification Opportunities for Telkom Indonesia and Buyung Poetra
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telkom and Buyung is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Buyung Poetra Sembada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buyung Poetra Sembada 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 Buyung Poetra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buyung Poetra Sembada has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Buyung Poetra go up and down completely randomly.
Pair Corralation between Telkom Indonesia and Buyung Poetra
Assuming the 90 days trading horizon Telkom Indonesia Tbk is expected to under-perform the Buyung Poetra. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 1.82 times less risky than Buyung Poetra. The stock trades about -0.1 of its potential returns per unit of risk. The Buyung Poetra Sembada is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 12,200 in Buyung Poetra Sembada on September 3, 2024 and sell it today you would earn a total of 200.00 from holding Buyung Poetra Sembada or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telkom Indonesia Tbk vs. Buyung Poetra Sembada
Performance |
| Timeline |
| Telkom Indonesia Tbk |
| Buyung Poetra Sembada |
Telkom Indonesia and Buyung Poetra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telkom Indonesia and Buyung Poetra
The main advantage of trading using opposite Telkom Indonesia and Buyung Poetra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telkom Indonesia position performs unexpectedly, Buyung Poetra 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 Buyung Poetra will offset losses from the drop in Buyung Poetra's long position.| Telkom Indonesia vs. Astra International Tbk | Telkom Indonesia vs. Bank Rakyat Indonesia | Telkom Indonesia vs. Bank Mandiri Persero | Telkom Indonesia vs. Bank Central Asia |
| Buyung Poetra vs. Astra International Tbk | Buyung Poetra vs. Unilever Indonesia Tbk | Buyung Poetra vs. Telkom Indonesia Tbk | Buyung Poetra vs. Bank Mandiri Persero |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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