Correlation Between Bank Mandiri and Iochpe Maxion

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

Diversification Opportunities for Bank Mandiri and Iochpe Maxion

-0.83

Correlation Coefficient

Bank Mandiri  Iochpe Maxion

Pay attention - limited upside

The 3 months correlation between Bank and Iochpe is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Iochpe Maxion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iochpe Maxion SA 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 Iochpe Maxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iochpe Maxion SA has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Iochpe Maxion go up and down completely randomly.

Pair Corralation between Bank Mandiri and Iochpe Maxion

Assuming the 90 days horizon Bank Mandiri Persero is expected to generate 1.94 times more return on investment than Iochpe Maxion. However, Bank Mandiri is 1.94 times more volatile than Iochpe Maxion SA. It trades about 0.04 of its potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.05 per unit of risk. If you would invest  31.00  in Bank Mandiri Persero on October 10, 2024 and sell it today you would earn a total of  4.00  from holding Bank Mandiri Persero or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	63.23%
Values	Daily Returns

Bank Mandiri Persero  vs.  Iochpe Maxion SA

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Iochpe Maxion SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iochpe Maxion SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Iochpe Maxion is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Iochpe Maxion

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

The idea behind Bank Mandiri Persero and Iochpe Maxion SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.