Correlation Between PT Indosat and Wise Plc

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

Diversification Opportunities for PT Indosat and Wise Plc

-0.62

Correlation Coefficient

PT Indosat  Wise Plc

Excellent diversification

The 3 months correlation between PTITF and Wise is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Indosat Tbk and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of PT Indosat i.e., PT Indosat and Wise Plc go up and down completely randomly.

Pair Corralation between PT Indosat and Wise Plc

Assuming the 90 days horizon PT Indosat Tbk is expected to under-perform the Wise Plc. In addition to that, PT Indosat is 3.44 times more volatile than Wise plc. It trades about -0.14 of its total potential returns per unit of risk. Wise plc is currently generating about 0.26 per unit of volatility. If you would invest  851.00  in Wise plc on September 21, 2024 and sell it today you would earn a total of  442.00  from holding Wise plc or generate 51.94% return on investment over 90 days.

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

PT Indosat Tbk  vs.  Wise plc

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 weak 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.

Wise plc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indosat and Wise Plc

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

The idea behind PT Indosat Tbk and Wise plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.