Correlation Between Bank Mandiri and ECN Capital

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

Diversification Opportunities for Bank Mandiri and ECN Capital

-0.85

Correlation Coefficient

Bank Mandiri  ECN Capital

Pay attention - limited upside

The 3 months correlation between Bank and ECN is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital Corp 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and ECN Capital go up and down completely randomly.

Pair Corralation between Bank Mandiri and ECN Capital

Assuming the 90 days horizon Bank Mandiri Persero is expected to generate 3.6 times more return on investment than ECN Capital. However, Bank Mandiri is 3.6 times more volatile than ECN Capital Corp. It trades about 0.06 of its potential returns per unit of risk. ECN Capital Corp is currently generating about 0.02 per unit of risk. If you would invest  29.00  in Bank Mandiri Persero on September 20, 2024 and sell it today you would earn a total of  8.00  from holding Bank Mandiri Persero or generate 27.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.03%
Values	Daily Returns

Bank Mandiri Persero  vs.  ECN Capital Corp

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 fragile performance in the last few months, the Stock's basic 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.

ECN Capital Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECN Capital Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, ECN Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and ECN Capital

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

The idea behind Bank Mandiri Persero and ECN Capital Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.