Correlation Between Central Pacific and Bank Mandiri

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

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

Diversification Opportunities for Central Pacific and Bank Mandiri

-0.76

Correlation Coefficient

Central Pacific  Bank Mandiri

Pay attention - limited upside

The 3 months correlation between Central and Bank is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial 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 Central Pacific 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 Central Pacific Financial 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 Central Pacific i.e., Central Pacific and Bank Mandiri go up and down completely randomly.

Pair Corralation between Central Pacific and Bank Mandiri

Considering the 90-day investment horizon Central Pacific Financial is expected to generate 0.68 times more return on investment than Bank Mandiri. However, Central Pacific Financial is 1.47 times less risky than Bank Mandiri. It trades about 0.22 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about -0.06 per unit of risk. If you would invest  2,665  in Central Pacific Financial on September 5, 2024 and sell it today you would earn a total of  455.00  from holding Central Pacific Financial or generate 17.07% return on investment over 90 days.

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

Central Pacific Financial  vs.  Bank Mandiri Persero

Central Pacific Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Pacific Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Central Pacific reported 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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Central Pacific and Bank Mandiri

The main advantage of trading using opposite Central Pacific and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Central Pacific Financial 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.