Correlation Between Bank Mandiri and Elmer Bancorp

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

Diversification Opportunities for Bank Mandiri and Elmer Bancorp

-0.6

Correlation Coefficient

Bank Mandiri  Elmer Bancorp

Excellent diversification

The 3 months correlation between Bank and Elmer is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Elmer Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmer Bancorp 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 Elmer Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmer Bancorp has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Elmer Bancorp go up and down completely randomly.

Pair Corralation between Bank Mandiri and Elmer Bancorp

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Elmer Bancorp. In addition to that, Bank Mandiri is 10.95 times more volatile than Elmer Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Elmer Bancorp is currently generating about 0.12 per unit of volatility. If you would invest  2,150  in Elmer Bancorp on September 27, 2024 and sell it today you would earn a total of  25.00  from holding Elmer Bancorp or generate 1.16% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Elmer Bancorp

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 unsteady 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.

Elmer Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elmer Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Elmer Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Elmer Bancorp

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

The idea behind Bank Mandiri Persero and Elmer Bancorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.