Correlation Between Bank Mandiri and American Business

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

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

Diversification Opportunities for Bank Mandiri and American Business

-0.28

Correlation Coefficient

Bank Mandiri  American Business

Very good diversification

The 3 months correlation between Bank and American is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business and Bank Mandiri 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 Bank Mandiri Persero are associated (or correlated) with American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and American Business go up and down completely randomly.

Pair Corralation between Bank Mandiri and American Business

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the American Business. In addition to that, Bank Mandiri is 4.63 times more volatile than American Business Bk. It trades about -0.11 of its total potential returns per unit of risk. American Business Bk is currently generating about -0.01 per unit of volatility. If you would invest  4,450  in American Business Bk on November 29, 2024 and sell it today you would lose (50.00) from holding American Business Bk or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Bank Mandiri Persero  vs.  American Business Bk

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

American Business

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bank Mandiri and American Business

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

The idea behind Bank Mandiri Persero and American Business Bk 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.