Correlation Between Mandala Multifinance and Bank Dinar

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

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

Diversification Opportunities for Mandala Multifinance and Bank Dinar

0.44

Correlation Coefficient

Mandala Multifinance  Bank Dinar

Very weak diversification

The 3 months correlation between Mandala and Bank is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mandala Multifinance Tbk and Bank Dinar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Dinar Indonesia and Mandala Multifinance 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 Mandala Multifinance Tbk are associated (or correlated) with Bank Dinar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Dinar Indonesia has no effect on the direction of Mandala Multifinance i.e., Mandala Multifinance and Bank Dinar go up and down completely randomly.

Pair Corralation between Mandala Multifinance and Bank Dinar

Assuming the 90 days trading horizon Mandala Multifinance Tbk is expected to generate 0.52 times more return on investment than Bank Dinar. However, Mandala Multifinance Tbk is 1.91 times less risky than Bank Dinar. It trades about 0.19 of its potential returns per unit of risk. Bank Dinar Indonesia is currently generating about -0.12 per unit of risk. If you would invest  335,000  in Mandala Multifinance Tbk on October 15, 2024 and sell it today you would earn a total of  27,000  from holding Mandala Multifinance Tbk or generate 8.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Mandala Multifinance Tbk  vs.  Bank Dinar Indonesia

Mandala Multifinance Tbk

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mandala Multifinance Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mandala Multifinance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Dinar Indonesia

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Dinar Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Dinar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mandala Multifinance and Bank Dinar

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

The idea behind Mandala Multifinance Tbk and Bank Dinar 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.