Correlation Between CHINA EDUCATION and BANK MANDIRI

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

By analyzing existing cross correlation between CHINA EDUCATION GROUP and BANK MANDIRI, you can compare the effects of market volatilities on CHINA EDUCATION 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 CHINA EDUCATION with a short position of BANK MANDIRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and BANK MANDIRI.

Diversification Opportunities for CHINA EDUCATION and BANK MANDIRI

0.78

Correlation Coefficient

CHINA EDUCATION  BANK MANDIRI

Poor diversification

The 3 months correlation between CHINA and BANK is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and BANK MANDIRI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK MANDIRI and CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and BANK MANDIRI go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and BANK MANDIRI

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 1.36 times more return on investment than BANK MANDIRI. However, CHINA EDUCATION is 1.36 times more volatile than BANK MANDIRI. It trades about -0.1 of its potential returns per unit of risk. BANK MANDIRI is currently generating about -0.18 per unit of risk. If you would invest  39.00  in CHINA EDUCATION GROUP on December 19, 2024 and sell it today you would lose (9.00) from holding CHINA EDUCATION GROUP or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  BANK MANDIRI

CHINA EDUCATION GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BANK MANDIRI

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CHINA EDUCATION and BANK MANDIRI

The main advantage of trading using opposite CHINA EDUCATION and BANK MANDIRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION 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 CHINA EDUCATION GROUP and BANK MANDIRI 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.