Correlation Between Bank Mestika and Bank Maspion

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

By analyzing existing cross correlation between Bank Mestika Dharma and Bank Maspion Indonesia, you can compare the effects of market volatilities on Bank Mestika and Bank Maspion 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 Mestika with a short position of Bank Maspion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mestika and Bank Maspion.

Diversification Opportunities for Bank Mestika and Bank Maspion

-0.52

Correlation Coefficient

Bank Mestika  Bank Maspion

Excellent diversification

The 3 months correlation between Bank and Bank is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mestika Dharma and Bank Maspion Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Maspion Indonesia and Bank Mestika 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 Mestika Dharma are associated (or correlated) with Bank Maspion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Maspion Indonesia has no effect on the direction of Bank Mestika i.e., Bank Mestika and Bank Maspion go up and down completely randomly.

Pair Corralation between Bank Mestika and Bank Maspion

Assuming the 90 days trading horizon Bank Mestika is expected to generate 33.78 times less return on investment than Bank Maspion. But when comparing it to its historical volatility, Bank Mestika Dharma is 3.82 times less risky than Bank Maspion. It trades about 0.01 of its potential returns per unit of risk. Bank Maspion Indonesia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  52,000  in Bank Maspion Indonesia on September 3, 2024 and sell it today you would earn a total of  8,000  from holding Bank Maspion Indonesia or generate 15.38% return on investment over 90 days.

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

Bank Mestika Dharma  vs.  Bank Maspion Indonesia

Bank Mestika Dharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mestika Dharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Mestika is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank Maspion Indonesia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Maspion Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Maspion disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mestika and Bank Maspion

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

The idea behind Bank Mestika Dharma and Bank Maspion Indonesia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.