Correlation Between Astra Agro and Bank Mandiri

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

By analyzing existing cross correlation between Astra Agro Lestari and Bank Mandiri Persero, you can compare the effects of market volatilities on Astra Agro and Bank Mandiri 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 Astra Agro with a short position of Bank Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra Agro and Bank Mandiri.

Diversification Opportunities for Astra Agro and Bank Mandiri

0.75

Correlation Coefficient

Astra Agro  Bank Mandiri

Poor diversification

The 3 months correlation between Astra and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Astra Agro Lestari and Bank Mandiri Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mandiri Persero and Astra Agro 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 Astra Agro Lestari are associated (or correlated) with Bank Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mandiri Persero has no effect on the direction of Astra Agro i.e., Astra Agro and Bank Mandiri go up and down completely randomly.

Pair Corralation between Astra Agro and Bank Mandiri

Assuming the 90 days trading horizon Astra Agro Lestari is expected to under-perform the Bank Mandiri. But the stock apears to be less risky and, when comparing its historical volatility, Astra Agro Lestari is 1.85 times less risky than Bank Mandiri. The stock trades about -0.1 of its potential returns per unit of risk. The Bank Mandiri Persero is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  570,000  in Bank Mandiri Persero on December 30, 2024 and sell it today you would lose (50,000) from holding Bank Mandiri Persero or give up 8.77% of portfolio value over 90 days.

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

Astra Agro Lestari  vs.  Bank Mandiri Persero

Astra Agro Lestari

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astra Agro Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bank Mandiri Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Mandiri Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Astra Agro and Bank Mandiri

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

The idea behind Astra Agro Lestari and Bank Mandiri Persero 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.