Correlation Between Bank Mandiri and Eastern Michigan

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

Diversification Opportunities for Bank Mandiri and Eastern Michigan

-0.8

Correlation Coefficient

Bank Mandiri  Eastern Michigan

Pay attention - limited upside

The 3 months correlation between Bank and Eastern is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Eastern Michigan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Michigan Fin 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 Eastern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Michigan Fin has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Eastern Michigan go up and down completely randomly.

Pair Corralation between Bank Mandiri and Eastern Michigan

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Eastern Michigan. In addition to that, Bank Mandiri is 3.34 times more volatile than Eastern Michigan Financial. It trades about 0.0 of its total potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.05 per unit of volatility. If you would invest  3,500  in Eastern Michigan Financial on August 31, 2024 and sell it today you would earn a total of  41.00  from holding Eastern Michigan Financial or generate 1.17% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Eastern Michigan Financial

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 nearly stable basic indicators, Bank Mandiri is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eastern Michigan Fin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Eastern Michigan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Eastern Michigan

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

The idea behind Bank Mandiri Persero and Eastern Michigan Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.