Correlation Between Bank Mandiri and Budi Starch

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

By analyzing existing cross correlation between Bank Mandiri Persero and Budi Starch Sweetener, you can compare the effects of market volatilities on Bank Mandiri and Budi Starch 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 Budi Starch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Budi Starch.

Diversification Opportunities for Bank Mandiri and Budi Starch

0.11

Correlation Coefficient

Bank Mandiri  Budi Starch

Average diversification

The 3 months correlation between Bank and Budi is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Budi Starch Sweetener in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budi Starch Sweetener 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 Persero are associated (or correlated) with Budi Starch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budi Starch Sweetener has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Budi Starch go up and down completely randomly.

Pair Corralation between Bank Mandiri and Budi Starch

Assuming the 90 days trading horizon Bank Mandiri Persero is expected to under-perform the Budi Starch. In addition to that, Bank Mandiri is 1.81 times more volatile than Budi Starch Sweetener. It trades about -0.11 of its total potential returns per unit of risk. Budi Starch Sweetener is currently generating about 0.01 per unit of volatility. If you would invest  22,700  in Budi Starch Sweetener on September 12, 2024 and sell it today you would earn a total of  100.00  from holding Budi Starch Sweetener or generate 0.44% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Budi Starch Sweetener

Bank Mandiri Persero

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Budi Starch Sweetener

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank Mandiri and Budi Starch

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

The idea behind Bank Mandiri Persero and Budi Starch Sweetener 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.