Correlation Between Bank Mandiri and Southern Michigan

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

Diversification Opportunities for Bank Mandiri and Southern Michigan

-0.25

Correlation Coefficient

Bank Mandiri  Southern Michigan

Very good diversification

The 3 months correlation between Bank and Southern is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp 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 Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Southern Michigan go up and down completely randomly.

Pair Corralation between Bank Mandiri and Southern Michigan

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Southern Michigan. In addition to that, Bank Mandiri is 14.13 times more volatile than Southern Michigan Bancorp. It trades about 0.0 of its total potential returns per unit of risk. Southern Michigan Bancorp is currently generating about -0.02 per unit of volatility. If you would invest  1,910  in Southern Michigan Bancorp on December 28, 2024 and sell it today you would lose (10.00) from holding Southern Michigan Bancorp or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Bank Mandiri Persero  vs.  Southern Michigan Bancorp

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.

Southern Michigan Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Michigan Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Southern Michigan is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank Mandiri and Southern Michigan

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

The idea behind Bank Mandiri Persero and Southern Michigan Bancorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.