Correlation Between Bank Mandiri and Sumber Alfaria

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

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

Diversification Opportunities for Bank Mandiri and Sumber Alfaria

0.69

Correlation Coefficient

Bank Mandiri  Sumber Alfaria

Poor diversification

The 3 months correlation between Bank and Sumber is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Sumber Alfaria Trijaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Alfaria Trijaya and Bank Mandiri 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 Bank Mandiri Persero are associated (or correlated) with Sumber Alfaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Alfaria Trijaya has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Sumber Alfaria go up and down completely randomly.

Pair Corralation between Bank Mandiri and Sumber Alfaria

Assuming the 90 days trading horizon Bank Mandiri Persero is expected to under-perform the Sumber Alfaria. But the stock apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.09 times less risky than Sumber Alfaria. The stock trades about -0.16 of its potential returns per unit of risk. The Sumber Alfaria Trijaya is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  312,000  in Sumber Alfaria Trijaya on September 19, 2024 and sell it today you would lose (27,000) from holding Sumber Alfaria Trijaya or give up 8.65% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Sumber Alfaria Trijaya

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 conflicting performance in the last few months, the Stock's forward-looking signals 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.

Sumber Alfaria Trijaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Alfaria Trijaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bank Mandiri and Sumber Alfaria

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

The idea behind Bank Mandiri Persero and Sumber Alfaria Trijaya 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.