Correlation Between Perusahaan Gas and Bank Mandiri

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

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

Diversification Opportunities for Perusahaan Gas and Bank Mandiri

-0.07

Correlation Coefficient

Perusahaan Gas  Bank Mandiri

Good diversification

The 3 months correlation between Perusahaan and Bank is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Gas Negara 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 Perusahaan Gas 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 Perusahaan Gas Negara 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 Perusahaan Gas i.e., Perusahaan Gas and Bank Mandiri go up and down completely randomly.

Pair Corralation between Perusahaan Gas and Bank Mandiri

Assuming the 90 days trading horizon Perusahaan Gas Negara is expected to generate 0.84 times more return on investment than Bank Mandiri. However, Perusahaan Gas Negara is 1.18 times less risky than Bank Mandiri. It trades about -0.01 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about -0.12 per unit of risk. If you would invest  155,500  in Perusahaan Gas Negara on September 3, 2024 and sell it today you would lose (3,000) from holding Perusahaan Gas Negara or give up 1.93% of portfolio value over 90 days.

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

Perusahaan Gas Negara  vs.  Bank Mandiri Persero

Perusahaan Gas Negara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perusahaan Gas Negara has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Perusahaan Gas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 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.

Pair Trading with Perusahaan Gas and Bank Mandiri

The main advantage of trading using opposite Perusahaan Gas and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perusahaan Gas 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 Perusahaan Gas Negara 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.