Correlation Between BANK MANDIRI and WW Grainger

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

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

Diversification Opportunities for BANK MANDIRI and WW Grainger

-0.66

Correlation Coefficient

BANK MANDIRI  WW Grainger

Excellent diversification

The 3 months correlation between BANK and GWW is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger 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 WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and WW Grainger go up and down completely randomly.

Pair Corralation between BANK MANDIRI and WW Grainger

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 16.62 times less return on investment than WW Grainger. In addition to that, BANK MANDIRI is 1.57 times more volatile than WW Grainger. It trades about 0.0 of its total potential returns per unit of risk. WW Grainger is currently generating about 0.11 per unit of volatility. If you would invest  64,496  in WW Grainger on September 26, 2024 and sell it today you would earn a total of  38,954  from holding WW Grainger or generate 60.4% return on investment over 90 days.

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

BANK MANDIRI  vs.  WW Grainger

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 uncertain 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.

WW Grainger

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WW Grainger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BANK MANDIRI and WW Grainger

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

The idea behind BANK MANDIRI and WW Grainger 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.