Correlation Between Bank Mandiri and China Petroleum

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

Diversification Opportunities for Bank Mandiri and China Petroleum

0.61

Correlation Coefficient

Bank Mandiri  China Petroleum

Poor diversification

The 3 months correlation between Bank and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and China Petroleum go up and down completely randomly.

Pair Corralation between Bank Mandiri and China Petroleum

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the China Petroleum. In addition to that, Bank Mandiri is 1.05 times more volatile than China Petroleum Chemical. It trades about -0.04 of its total potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.02 per unit of volatility. If you would invest  58.00  in China Petroleum Chemical on September 16, 2024 and sell it today you would earn a total of  0.00  from holding China Petroleum Chemical or generate 0.0% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  China Petroleum Chemical

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 weak 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.

China Petroleum Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Petroleum Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, China Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Mandiri and China Petroleum

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

The idea behind Bank Mandiri Persero and China Petroleum Chemical 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.