Correlation Between Telkom Indonesia and Banco Santander

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

Diversification Opportunities for Telkom Indonesia and Banco Santander

-0.93

Correlation Coefficient

Telkom Indonesia  Banco Santander

Pay attention - limited upside

The 3 months correlation between Telkom and Banco is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and Banco Santander go up and down completely randomly.

Pair Corralation between Telkom Indonesia and Banco Santander

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, Telkom Indonesia Tbk is 2.74 times less risky than Banco Santander. The stock trades about -0.38 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Banco Santander SA on February 17, 2024 and sell it today you would earn a total of  140.00  from holding Banco Santander SA or generate 38.89% return on investment over 90 days.

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

Telkom Indonesia Tbk  vs.  Banco Santander SA

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

Banco Santander SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telkom Indonesia and Banco Santander

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

The idea behind Telkom Indonesia Tbk and Banco Santander 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 Stocks Directory module to find actively traded stocks across global markets.