Correlation Between ATT and Telkom Indonesia

Can any of the company-specific risk be diversified away by investing in both ATT and Telkom Indonesia 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 ATT and Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ATT Inc and Telkom Indonesia Tbk, you can compare the effects of market volatilities on ATT and Telkom Indonesia 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 ATT with a short position of Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Telkom Indonesia.

Diversification Opportunities for ATT and Telkom Indonesia

-0.23

Correlation Coefficient

ATT  Telkom Indonesia

Very good diversification

The 3 months correlation between ATT and Telkom is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and ATT 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 ATT Inc are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of ATT i.e., ATT and Telkom Indonesia go up and down completely randomly.

Pair Corralation between ATT and Telkom Indonesia

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.42 times more return on investment than Telkom Indonesia. However, ATT Inc is 2.4 times less risky than Telkom Indonesia. It trades about 0.32 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about -0.11 per unit of risk. If you would invest  1,631  in ATT Inc on February 21, 2024 and sell it today you would earn a total of  96.00  from holding ATT Inc or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ATT Inc  vs.  Telkom Indonesia Tbk

ATT Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Telkom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telkom Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ATT and Telkom Indonesia

The main advantage of trading using opposite ATT and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Telkom Indonesia 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 Telkom Indonesia will offset losses from the drop in Telkom Indonesia's long position.

The idea behind ATT Inc and Telkom Indonesia Tbk 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.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .