Correlation Between Bank Mandiri and Air New

Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and Air New 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 Air New 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 Air New Zealand, you can compare the effects of market volatilities on Bank Mandiri and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Air New.

Diversification Opportunities for Bank Mandiri and Air New

0.67

Correlation Coefficient

Bank Mandiri  Air New

Poor diversification

The 3 months correlation between Bank and Air is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Air New go up and down completely randomly.

Pair Corralation between Bank Mandiri and Air New

Assuming the 90 days horizon Bank Mandiri Persero is expected to generate 1.16 times more return on investment than Air New. However, Bank Mandiri is 1.16 times more volatile than Air New Zealand. It trades about -0.02 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.09 per unit of risk. If you would invest  48.00  in Bank Mandiri Persero on September 2, 2024 and sell it today you would lose (5.00) from holding Bank Mandiri Persero or give up 10.42% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Air New Zealand

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. Despite nearly stable basic indicators, Bank Mandiri is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air New Zealand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air New Zealand 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Mandiri and Air New

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

The idea behind Bank Mandiri Persero and Air New Zealand 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.