Correlation Between Mandala Multifinance and Trust Finance

Can any of the company-specific risk be diversified away by investing in both Mandala Multifinance and Trust Finance 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 Trust Finance 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 Trust Finance Indonesia, you can compare the effects of market volatilities on Mandala Multifinance and Trust Finance 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 Trust Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mandala Multifinance and Trust Finance.

Diversification Opportunities for Mandala Multifinance and Trust Finance

-0.08

Correlation Coefficient

Mandala Multifinance  Trust Finance

Good diversification

The 3 months correlation between Mandala and Trust is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mandala Multifinance Tbk and Trust Finance Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trust Finance 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 Trust Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trust Finance Indonesia has no effect on the direction of Mandala Multifinance i.e., Mandala Multifinance and Trust Finance go up and down completely randomly.

Pair Corralation between Mandala Multifinance and Trust Finance

Assuming the 90 days trading horizon Mandala Multifinance Tbk is expected to generate 0.6 times more return on investment than Trust Finance. However, Mandala Multifinance Tbk is 1.67 times less risky than Trust Finance. It trades about 0.04 of its potential returns per unit of risk. Trust Finance Indonesia is currently generating about -0.05 per unit of risk. If you would invest  335,000  in Mandala Multifinance Tbk on December 30, 2024 and sell it today you would earn a total of  15,000  from holding Mandala Multifinance Tbk or generate 4.48% return on investment over 90 days.

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

Mandala Multifinance Tbk  vs.  Trust Finance Indonesia

Mandala Multifinance Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mandala Multifinance Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mandala Multifinance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Trust Finance Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trust Finance Indonesia 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Mandala Multifinance and Trust Finance

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

The idea behind Mandala Multifinance Tbk and Trust Finance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..