Correlation Between BANK MANDIRI and Lloyds Banking

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

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

Diversification Opportunities for BANK MANDIRI and Lloyds Banking

0.67

Correlation Coefficient

BANK MANDIRI  Lloyds Banking

Poor diversification

The 3 months correlation between BANK and Lloyds is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and Lloyds Banking go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Lloyds Banking

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the Lloyds Banking. In addition to that, BANK MANDIRI is 1.19 times more volatile than Lloyds Banking Group. It trades about -0.07 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about -0.04 per unit of volatility. If you would invest  68.00  in Lloyds Banking Group on September 5, 2024 and sell it today you would lose (4.00) from holding Lloyds Banking Group or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BANK MANDIRI  vs.  Lloyds Banking Group

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lloyds Banking 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 Lloyds Banking

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

The idea behind BANK MANDIRI and Lloyds Banking Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.