Correlation Between Bank Mandiri and Premier Foods

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

Diversification Opportunities for Bank Mandiri and Premier Foods

-0.39

Correlation Coefficient

Bank Mandiri  Premier Foods

Very good diversification

The 3 months correlation between Bank and Premier is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Premier Foods Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods Plc 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods Plc has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Premier Foods go up and down completely randomly.

Pair Corralation between Bank Mandiri and Premier Foods

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Premier Foods. In addition to that, Bank Mandiri is 3.5 times more volatile than Premier Foods Plc. It trades about -0.02 of its total potential returns per unit of risk. Premier Foods Plc is currently generating about 0.11 per unit of volatility. If you would invest  1,136  in Premier Foods Plc on September 1, 2024 and sell it today you would earn a total of  90.00  from holding Premier Foods Plc or generate 7.92% 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.  Premier Foods Plc

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.

Premier Foods Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bank Mandiri and Premier Foods

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

The idea behind Bank Mandiri Persero and Premier Foods Plc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.