Correlation Between Bank Mandiri and Hang Seng

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

Diversification Opportunities for Bank Mandiri and Hang Seng

-0.16

Correlation Coefficient

Bank Mandiri  Hang Seng

Good diversification

The 3 months correlation between Bank and Hang is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Hang Seng go up and down completely randomly.

Pair Corralation between Bank Mandiri and Hang Seng

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Hang Seng. In addition to that, Bank Mandiri is 2.05 times more volatile than Hang Seng Bank. It trades about -0.02 of its total potential returns per unit of risk. Hang Seng Bank is currently generating about 0.03 per unit of volatility. If you would invest  1,161  in Hang Seng Bank on September 2, 2024 and sell it today you would earn a total of  31.00  from holding Hang Seng Bank or generate 2.67% 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.  Hang Seng Bank

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.

Hang Seng Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hang Seng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Hang Seng

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

The idea behind Bank Mandiri Persero and Hang Seng 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.