Correlation Between Banco Do and Bank Mandiri

Can any of the company-specific risk be diversified away by investing in both Banco Do and Bank Mandiri 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 Banco Do and Bank Mandiri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco do Brasil and Bank Mandiri Persero, you can compare the effects of market volatilities on Banco Do and Bank Mandiri 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 Banco Do with a short position of Bank Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Bank Mandiri.

Diversification Opportunities for Banco Do and Bank Mandiri

0.81

Correlation Coefficient

Banco Do  Bank Mandiri

Very poor diversification

The 3 months correlation between Banco and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Bank Mandiri Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mandiri Persero and Banco Do 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 Banco do Brasil are associated (or correlated) with Bank Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mandiri Persero has no effect on the direction of Banco Do i.e., Banco Do and Bank Mandiri go up and down completely randomly.

Pair Corralation between Banco Do and Bank Mandiri

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Bank Mandiri. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 3.91 times less risky than Bank Mandiri. The stock trades about -0.17 of its potential returns per unit of risk. The Bank Mandiri Persero is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Bank Mandiri Persero on September 2, 2024 and sell it today you would lose (5.00) from holding Bank Mandiri Persero or give up 10.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Banco do Brasil  vs.  Bank Mandiri Persero

Banco do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bank Mandiri Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mandiri Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bank Mandiri is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco Do and Bank Mandiri

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

The idea behind Banco do Brasil and Bank Mandiri Persero 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.