Correlation Between BANK MANDIRI and General Mills

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

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

Diversification Opportunities for BANK MANDIRI and General Mills

0.78

Correlation Coefficient

BANK MANDIRI  General Mills

Poor diversification

The 3 months correlation between BANK and General is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and General Mills go up and down completely randomly.

Pair Corralation between BANK MANDIRI and General Mills

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 1.92 times more return on investment than General Mills. However, BANK MANDIRI is 1.92 times more volatile than General Mills. It trades about 0.03 of its potential returns per unit of risk. General Mills is currently generating about -0.02 per unit of risk. If you would invest  29.00  in BANK MANDIRI on August 31, 2024 and sell it today you would earn a total of  6.00  from holding BANK MANDIRI or generate 20.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.74%
Values	Daily Returns

BANK MANDIRI  vs.  General Mills

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 rather sound basic indicators, BANK MANDIRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, General Mills is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK MANDIRI and General Mills

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

The idea behind BANK MANDIRI and General Mills 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.