Correlation Between Telkom Indonesia and Avant Brands

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

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

Diversification Opportunities for Telkom Indonesia and Avant Brands

0.9

Correlation Coefficient

Telkom Indonesia  Avant Brands

Almost no diversification

The 3 months correlation between Telkom and Avant is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Avant Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avant Brands and Telkom Indonesia 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 Telkom Indonesia Tbk are associated (or correlated) with Avant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avant Brands has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Avant Brands go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Avant Brands

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to generate 0.47 times more return on investment than Avant Brands. However, Telkom Indonesia Tbk is 2.14 times less risky than Avant Brands. It trades about -0.12 of its potential returns per unit of risk. Avant Brands is currently generating about -0.26 per unit of risk. If you would invest  2,039  in Telkom Indonesia Tbk on September 13, 2024 and sell it today you would lose (277.00) from holding Telkom Indonesia Tbk or give up 13.59% of portfolio value over 90 days.

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

Telkom Indonesia Tbk  vs.  Avant Brands

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. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Avant Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avant Brands 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 fundamental drivers 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.

Pair Trading with Telkom Indonesia and Avant Brands

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

The idea behind Telkom Indonesia Tbk and Avant Brands 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .