Correlation Between Bank Mandiri and Exchange Bank

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

Diversification Opportunities for Bank Mandiri and Exchange Bank

-0.24

Correlation Coefficient

Bank Mandiri  Exchange Bank

Very good diversification

The 3 months correlation between Bank and Exchange is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank 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 Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Exchange Bank go up and down completely randomly.

Pair Corralation between Bank Mandiri and Exchange Bank

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Exchange Bank. In addition to that, Bank Mandiri is 1.85 times more volatile than Exchange Bank. It trades about -0.04 of its total potential returns per unit of risk. Exchange Bank is currently generating about 0.04 per unit of volatility. If you would invest  10,870  in Exchange Bank on December 21, 2024 and sell it today you would earn a total of  505.00  from holding Exchange Bank or generate 4.65% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Exchange Bank

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

Exchange Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exchange Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Mandiri and Exchange Bank

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

The idea behind Bank Mandiri Persero and Exchange Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.