Correlation Between Bank Mandiri and Li Ning

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

Diversification Opportunities for Bank Mandiri and Li Ning

-0.5

Correlation Coefficient

Bank Mandiri  Li Ning

Very good diversification

The 3 months correlation between Bank and LNNGF is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Li Ning go up and down completely randomly.

Pair Corralation between Bank Mandiri and Li Ning

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Li Ning. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.23 times less risky than Li Ning. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Li Ning Company is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Li Ning Company on September 4, 2024 and sell it today you would earn a total of  27.00  from holding Li Ning Company or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Bank Mandiri Persero  vs.  Li Ning Company

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Li Ning Company

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Li Ning reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Li Ning

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

The idea behind Bank Mandiri Persero and Li Ning Company 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.