Correlation Between PT Indosat and Telecom Argentina

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

Diversification Opportunities for PT Indosat and Telecom Argentina

-0.41

Correlation Coefficient

PT Indosat  Telecom Argentina

Very good diversification

The 3 months correlation between PTITF and Telecom is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of PT Indosat i.e., PT Indosat and Telecom Argentina go up and down completely randomly.

Pair Corralation between PT Indosat and Telecom Argentina

Assuming the 90 days horizon PT Indosat Tbk is expected to under-perform the Telecom Argentina. In addition to that, PT Indosat is 2.58 times more volatile than Telecom Argentina SA. It trades about -0.14 of its total potential returns per unit of risk. Telecom Argentina SA is currently generating about 0.25 per unit of volatility. If you would invest  805.00  in Telecom Argentina SA on September 18, 2024 and sell it today you would earn a total of  555.00  from holding Telecom Argentina SA or generate 68.94% return on investment over 90 days.

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

PT Indosat Tbk  vs.  Telecom Argentina SA

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.

Telecom Argentina

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Telecom Argentina displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indosat and Telecom Argentina

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

The idea behind PT Indosat Tbk and Telecom Argentina SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.