Correlation Between Bank Mandiri and Solar Alliance

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

Diversification Opportunities for Bank Mandiri and Solar Alliance

0.73

Correlation Coefficient

Bank Mandiri  Solar Alliance

Poor diversification

The 3 months correlation between Bank and Solar is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy 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 Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Solar Alliance go up and down completely randomly.

Pair Corralation between Bank Mandiri and Solar Alliance

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Solar Alliance. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.96 times less risky than Solar Alliance. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Solar Alliance Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.03  in Solar Alliance Energy on December 27, 2024 and sell it today you would lose (0.37) from holding Solar Alliance Energy or give up 18.23% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Solar Alliance Energy

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 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.

Solar Alliance Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Solar Alliance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Solar Alliance

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

The idea behind Bank Mandiri Persero and Solar Alliance Energy 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.