Correlation Between MSAD Insurance and Bank Mandiri

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

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

Diversification Opportunities for MSAD Insurance and Bank Mandiri

0.11

Correlation Coefficient

MSAD Insurance  Bank Mandiri

Average diversification

The 3 months correlation between MSAD and Bank is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding MSAD Insurance Group 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 MSAD Insurance 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 MSAD Insurance 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 Persero has no effect on the direction of MSAD Insurance i.e., MSAD Insurance and Bank Mandiri go up and down completely randomly.

Pair Corralation between MSAD Insurance and Bank Mandiri

Assuming the 90 days horizon MSAD Insurance Group is expected to generate 1.26 times more return on investment than Bank Mandiri. However, MSAD Insurance is 1.26 times more volatile than Bank Mandiri Persero. It trades about 0.11 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about 0.01 per unit of risk. If you would invest  1,209  in MSAD Insurance Group on September 14, 2024 and sell it today you would earn a total of  1,044  from holding MSAD Insurance Group or generate 86.35% return on investment over 90 days.

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

MSAD Insurance Group  vs.  Bank Mandiri Persero

MSAD Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSAD Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, MSAD Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MSAD Insurance and Bank Mandiri

The main advantage of trading using opposite MSAD Insurance and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSAD Insurance 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 MSAD Insurance Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.