Correlation Between PT Indosat and MTN Group

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

By analyzing existing cross correlation between PT Indosat Tbk and MTN Group Ltd, you can compare the effects of market volatilities on PT Indosat and MTN Group 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 PT Indosat with a short position of MTN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indosat and MTN Group.

Diversification Opportunities for PT Indosat and MTN Group

0.06

Correlation Coefficient

PT Indosat  MTN Group

Significant diversification

The 3 months correlation between PTITF and MTN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and MTN Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and PT Indosat 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 PT Indosat Tbk are associated (or correlated) with MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of PT Indosat i.e., PT Indosat and MTN Group go up and down completely randomly.

Pair Corralation between PT Indosat and MTN Group

Assuming the 90 days horizon PT Indosat Tbk is expected to under-perform the MTN Group. In addition to that, PT Indosat is 4.09 times more volatile than MTN Group Ltd. It trades about -0.14 of its total potential returns per unit of risk. MTN Group Ltd is currently generating about -0.07 per unit of volatility. If you would invest  545.00  in MTN Group Ltd on September 18, 2024 and sell it today you would lose (58.00) from holding MTN Group Ltd or give up 10.64% of portfolio value over 90 days.

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

PT Indosat Tbk  vs.  MTN Group Ltd

PT Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PT Indosat and MTN Group

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

The idea behind PT Indosat Tbk and MTN Group Ltd 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.