Correlation Between PT Indosat and Telenor ASA

Can any of the company-specific risk be diversified away by investing in both PT Indosat and Telenor ASA 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 Telenor ASA 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 Telenor ASA ADR, you can compare the effects of market volatilities on PT Indosat and Telenor ASA 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 Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indosat and Telenor ASA.

Diversification Opportunities for PT Indosat and Telenor ASA

0.56

Correlation Coefficient

PT Indosat  Telenor ASA

Very weak diversification

The 3 months correlation between PTITF and Telenor is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of PT Indosat i.e., PT Indosat and Telenor ASA go up and down completely randomly.

Pair Corralation between PT Indosat and Telenor ASA

Assuming the 90 days horizon PT Indosat Tbk is expected to under-perform the Telenor ASA. In addition to that, PT Indosat is 6.88 times more volatile than Telenor ASA ADR. It trades about -0.14 of its total potential returns per unit of risk. Telenor ASA ADR is currently generating about -0.1 per unit of volatility. If you would invest  1,243  in Telenor ASA ADR on September 18, 2024 and sell it today you would lose (104.00) from holding Telenor ASA ADR or give up 8.37% of portfolio value over 90 days.

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

PT Indosat Tbk  vs.  Telenor ASA ADR

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.

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA ADR 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 Telenor ASA

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

The idea behind PT Indosat Tbk and Telenor ASA ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.