Correlation Between First Community and Bank Mandiri

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

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

Diversification Opportunities for First Community and Bank Mandiri

0.73

Correlation Coefficient

First Community  Bank Mandiri

Poor diversification

The 3 months correlation between First and Bank is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial 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 First Community 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 First Community Financial 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 First Community i.e., First Community and Bank Mandiri go up and down completely randomly.

Pair Corralation between First Community and Bank Mandiri

Given the investment horizon of 90 days First Community Financial is expected to under-perform the Bank Mandiri. But the pink sheet apears to be less risky and, when comparing its historical volatility, First Community Financial is 2.49 times less risky than Bank Mandiri. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Bank Mandiri Persero is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Bank Mandiri Persero on December 28, 2024 and sell it today you would lose (4.00) from holding Bank Mandiri Persero or give up 11.43% of portfolio value over 90 days.

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

First Community Financial  vs.  Bank Mandiri Persero

First Community Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 nearly stable basic indicators, Bank Mandiri is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Community and Bank Mandiri

The main advantage of trading using opposite First Community and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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 First Community Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.