Correlation Between Ford and Mandala Multifinance

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

By analyzing existing cross correlation between Ford Motor and Mandala Multifinance Tbk, you can compare the effects of market volatilities on Ford and Mandala Multifinance 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 Ford with a short position of Mandala Multifinance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Mandala Multifinance.

Diversification Opportunities for Ford and Mandala Multifinance

0.34

Correlation Coefficient

Ford  Mandala Multifinance

Weak diversification

The 3 months correlation between Ford and Mandala is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mandala Multifinance Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mandala Multifinance Tbk and Ford 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 Ford Motor are associated (or correlated) with Mandala Multifinance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mandala Multifinance Tbk has no effect on the direction of Ford i.e., Ford and Mandala Multifinance go up and down completely randomly.

Pair Corralation between Ford and Mandala Multifinance

Taking into account the 90-day investment horizon Ford is expected to generate 35.03 times less return on investment than Mandala Multifinance. But when comparing it to its historical volatility, Ford Motor is 3.88 times less risky than Mandala Multifinance. It trades about 0.02 of its potential returns per unit of risk. Mandala Multifinance Tbk is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  142,105  in Mandala Multifinance Tbk on September 5, 2024 and sell it today you would earn a total of  192,895  from holding Mandala Multifinance Tbk or generate 135.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Ford Motor  vs.  Mandala Multifinance Tbk

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Mandala Multifinance Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mandala Multifinance Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mandala Multifinance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Mandala Multifinance

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

The idea behind Ford Motor and Mandala Multifinance Tbk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.