Correlation Between Orkla ASA and Bank Mandiri

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

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

Diversification Opportunities for Orkla ASA and Bank Mandiri

-0.39

Correlation Coefficient

Orkla ASA  Bank Mandiri

Very good diversification

The 3 months correlation between Orkla and Bank is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA ADR 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 Orkla ASA 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 Orkla ASA ADR 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 Orkla ASA i.e., Orkla ASA and Bank Mandiri go up and down completely randomly.

Pair Corralation between Orkla ASA and Bank Mandiri

Assuming the 90 days horizon Orkla ASA ADR is expected to generate 0.48 times more return on investment than Bank Mandiri. However, Orkla ASA ADR is 2.07 times less risky than Bank Mandiri. It trades about 0.09 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about -0.17 per unit of risk. If you would invest  910.00  in Orkla ASA ADR on December 1, 2024 and sell it today you would earn a total of  61.00  from holding Orkla ASA ADR or generate 6.7% return on investment over 90 days.

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

Orkla ASA ADR  vs.  Bank Mandiri Persero

Orkla ASA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Orkla ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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

Pair Trading with Orkla ASA and Bank Mandiri

The main advantage of trading using opposite Orkla ASA and Bank Mandiri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA 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 Orkla ASA ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.