Correlation Between Bank Mandiri and AmTrust Financial

Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and AmTrust Financial 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 AmTrust Financial 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 AmTrust Financial Services, you can compare the effects of market volatilities on Bank Mandiri and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and AmTrust Financial.

Diversification Opportunities for Bank Mandiri and AmTrust Financial

-0.68

Correlation Coefficient

Bank Mandiri  AmTrust Financial

Excellent diversification

The 3 months correlation between Bank and AmTrust is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and AmTrust Financial go up and down completely randomly.

Pair Corralation between Bank Mandiri and AmTrust Financial

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the AmTrust Financial. In addition to that, Bank Mandiri is 2.02 times more volatile than AmTrust Financial Services. It trades about -0.04 of its total potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.06 per unit of volatility. If you would invest  1,356  in AmTrust Financial Services on September 12, 2024 and sell it today you would earn a total of  96.00  from holding AmTrust Financial Services or generate 7.08% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  AmTrust Financial Services

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AmTrust Financial

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Mandiri and AmTrust Financial

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

The idea behind Bank Mandiri Persero and AmTrust Financial Services 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.