Correlation Between Bank Mandiri and ABN AMRO

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

Diversification Opportunities for Bank Mandiri and ABN AMRO

0.87

Correlation Coefficient

Bank Mandiri  ABN AMRO

Very poor diversification

The 3 months correlation between Bank and ABN is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and ABN AMRO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN AMRO Bank 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 ABN AMRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN AMRO Bank has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and ABN AMRO go up and down completely randomly.

Pair Corralation between Bank Mandiri and ABN AMRO

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the ABN AMRO. In addition to that, Bank Mandiri is 1.23 times more volatile than ABN AMRO Bank. It trades about -0.13 of its total potential returns per unit of risk. ABN AMRO Bank is currently generating about -0.1 per unit of volatility. If you would invest  1,692  in ABN AMRO Bank on September 4, 2024 and sell it today you would lose (158.00) from holding ABN AMRO Bank or give up 9.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Bank Mandiri Persero  vs.  ABN AMRO 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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ABN AMRO Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABN AMRO Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank Mandiri and ABN AMRO

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

The idea behind Bank Mandiri Persero and ABN AMRO 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 Global Correlations module to find global opportunities by holding instruments from different markets.