Correlation Between Telkom Indonesia and Bank of Botetourt

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

Diversification Opportunities for Telkom Indonesia and Bank of Botetourt

-0.55

Correlation Coefficient

Telkom Indonesia  Bank of Botetourt

Excellent diversification

The 3 months correlation between Telkom and Bank is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt 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 Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Bank of Botetourt go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Bank of Botetourt

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Bank of Botetourt. In addition to that, Telkom Indonesia is 2.25 times more volatile than Bank of Botetourt. It trades about -0.14 of its total potential returns per unit of risk. Bank of Botetourt is currently generating about 0.07 per unit of volatility. If you would invest  3,110  in Bank of Botetourt on August 31, 2024 and sell it today you would earn a total of  104.00  from holding Bank of Botetourt or generate 3.34% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Bank of Botetourt

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 sluggish performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank of Botetourt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telkom Indonesia and Bank of Botetourt

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

The idea behind Telkom Indonesia Tbk and Bank of Botetourt 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.