Correlation Between Bank Mandiri and CITIC

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

Diversification Opportunities for Bank Mandiri and CITIC

-0.46

Correlation Coefficient

Bank Mandiri  CITIC

Very good diversification

The 3 months correlation between Bank and CITIC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and CITIC go up and down completely randomly.

Pair Corralation between Bank Mandiri and CITIC

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the CITIC. In addition to that, Bank Mandiri is 1.45 times more volatile than CITIC Limited. It trades about -0.04 of its total potential returns per unit of risk. CITIC Limited is currently generating about 0.12 per unit of volatility. If you would invest  92.00  in CITIC Limited on September 12, 2024 and sell it today you would earn a total of  18.00  from holding CITIC Limited or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bank Mandiri Persero  vs.  CITIC Limited

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.

CITIC Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and CITIC

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

The idea behind Bank Mandiri Persero and CITIC Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.