Correlation Between Caterpillar and Bank Mandiri

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

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

Diversification Opportunities for Caterpillar and Bank Mandiri

-0.65

Correlation Coefficient

Caterpillar  Bank Mandiri

Excellent diversification

The 3 months correlation between Caterpillar and Bank is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar 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 Caterpillar 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 Caterpillar 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 Caterpillar i.e., Caterpillar and Bank Mandiri go up and down completely randomly.

Pair Corralation between Caterpillar and Bank Mandiri

Considering the 90-day investment horizon Caterpillar is expected to generate 0.53 times more return on investment than Bank Mandiri. However, Caterpillar is 1.9 times less risky than Bank Mandiri. It trades about 0.15 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about -0.03 per unit of risk. If you would invest  37,963  in Caterpillar on September 2, 2024 and sell it today you would earn a total of  2,648  from holding Caterpillar or generate 6.98% return on investment over 90 days.

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

Caterpillar  vs.  Bank Mandiri Persero

Caterpillar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caterpillar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Caterpillar unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Caterpillar and Bank Mandiri

The main advantage of trading using opposite Caterpillar and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar 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 Caterpillar 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.