Correlation Between BANK MANDIRI and NEXTDC

Can any of the company-specific risk be diversified away by investing in both BANK MANDIRI and NEXTDC 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 NEXTDC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BANK MANDIRI and NEXTDC LTD, you can compare the effects of market volatilities on BANK MANDIRI and NEXTDC 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 NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK MANDIRI and NEXTDC.

Diversification Opportunities for BANK MANDIRI and NEXTDC

0.64

Correlation Coefficient

BANK MANDIRI  NEXTDC

Poor diversification

The 3 months correlation between BANK and NEXTDC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD 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 are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and NEXTDC go up and down completely randomly.

Pair Corralation between BANK MANDIRI and NEXTDC

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 0.97 times more return on investment than NEXTDC. However, BANK MANDIRI is 1.04 times less risky than NEXTDC. It trades about -0.02 of its potential returns per unit of risk. NEXTDC LTD is currently generating about -0.01 per unit of risk. If you would invest  36.00  in BANK MANDIRI on September 24, 2024 and sell it today you would lose (4.00) from holding BANK MANDIRI or give up 11.11% of portfolio value over 90 days.

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

BANK MANDIRI  vs.  NEXTDC LTD

BANK MANDIRI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK MANDIRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NEXTDC LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with BANK MANDIRI and NEXTDC

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

The idea behind BANK MANDIRI and NEXTDC LTD 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..