Correlation Between Bank Mandiri and Whiting Petroleum

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

Diversification Opportunities for Bank Mandiri and Whiting Petroleum

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bank and Whiting is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Bank Mandiri and Whiting Petroleum

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Whiting Petroleum. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 3.35 times less risky than Whiting Petroleum. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Whiting Petroleum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  306.00  in Whiting Petroleum on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Whiting Petroleum or generate 7.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bank Mandiri Persero  vs.  Whiting Petroleum

 Performance 
       Timeline  
Bank Mandiri Persero 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Whiting Petroleum 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Bank Mandiri and Whiting Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank Mandiri and Whiting Petroleum

The main advantage of trading using opposite Bank Mandiri and Whiting Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, Whiting Petroleum 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 Whiting Petroleum will offset losses from the drop in Whiting Petroleum's long position.
The idea behind Bank Mandiri Persero and Whiting Petroleum 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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