Correlation Between Petroleo Brasileiro and Telkom Indonesia

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

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

Diversification Opportunities for Petroleo Brasileiro and Telkom Indonesia

0.19

Correlation Coefficient

Petroleo Brasileiro  Telkom Indonesia

Average diversification

The 3 months correlation between Petroleo and Telkom is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras 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 Petroleo Brasileiro 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 Petroleo Brasileiro Petrobras 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 Petroleo Brasileiro i.e., Petroleo Brasileiro and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Telkom Indonesia

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 2.47 times less return on investment than Telkom Indonesia. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 3.46 times less risky than Telkom Indonesia. It trades about 0.01 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Telkom Indonesia Tbk on September 13, 2024 and sell it today you would lose (1.00) from holding Telkom Indonesia Tbk or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Telkom Indonesia Tbk

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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. In spite of comparatively stable basic indicators, Telkom Indonesia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Telkom Indonesia

The main advantage of trading using opposite Petroleo Brasileiro and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro 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 Petroleo Brasileiro Petrobras 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.