Correlation Between Bank Mandiri and WSP Global

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

Diversification Opportunities for Bank Mandiri and WSP Global

-0.18

Correlation Coefficient

Bank Mandiri  WSP Global

Good diversification

The 3 months correlation between Bank and WSP is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global 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 WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and WSP Global go up and down completely randomly.

Pair Corralation between Bank Mandiri and WSP Global

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the WSP Global. In addition to that, Bank Mandiri is 4.31 times more volatile than WSP Global. It trades about -0.06 of its total potential returns per unit of risk. WSP Global is currently generating about 0.11 per unit of volatility. If you would invest  16,550  in WSP Global on September 4, 2024 and sell it today you would earn a total of  1,098  from holding WSP Global or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bank Mandiri Persero  vs.  WSP Global

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

WSP Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WSP Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Mandiri and WSP Global

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

The idea behind Bank Mandiri Persero and WSP Global 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.