Correlation Between Telkom Indonesia and BCE

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

Diversification Opportunities for Telkom Indonesia and BCE

0.73

Correlation Coefficient

Telkom Indonesia  BCE

Poor diversification

The 3 months correlation between Telkom and BCE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Telkom Indonesia Tbk and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Telkom Indonesia i.e., Telkom Indonesia and BCE go up and down completely randomly.

Pair Corralation between Telkom Indonesia and BCE

Considering the 90-day investment horizon Telkom Indonesia Tbk is expected to under-perform the BCE. In addition to that, Telkom Indonesia is 1.78 times more volatile than BCE Inc. It trades about -0.27 of its total potential returns per unit of risk. BCE Inc is currently generating about -0.12 per unit of volatility. If you would invest  3,683  in BCE Inc on February 23, 2024 and sell it today you would lose (268.00) from holding BCE Inc or give up 7.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Telkom Indonesia Tbk  vs.  BCE Inc

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 June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Telkom Indonesia and BCE

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

The idea behind Telkom Indonesia Tbk and BCE Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.