Correlation Between Bank Mandiri and Industrial Commercial

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

Diversification Opportunities for Bank Mandiri and Industrial Commercial

-0.45

Correlation Coefficient

Bank Mandiri  Industrial Commercial

Very good diversification

The 3 months correlation between Bank and Industrial is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Industrial Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Commercial 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 Industrial Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Commercial has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Industrial Commercial go up and down completely randomly.

Pair Corralation between Bank Mandiri and Industrial Commercial

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Industrial Commercial. In addition to that, Bank Mandiri is 1.7 times more volatile than Industrial Commercial Bank. It trades about -0.02 of its total potential returns per unit of risk. Industrial Commercial Bank is currently generating about 0.07 per unit of volatility. If you would invest  1,086  in Industrial Commercial Bank on September 3, 2024 and sell it today you would earn a total of  100.00  from holding Industrial Commercial Bank or generate 9.21% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Industrial Commercial Bank

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.

Industrial Commercial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Commercial Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Industrial Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Mandiri and Industrial Commercial

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

The idea behind Bank Mandiri Persero and Industrial Commercial Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.