Correlation Between Bank Mandiri and West Shore

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

Diversification Opportunities for Bank Mandiri and West Shore

-0.7

Correlation Coefficient

Bank Mandiri  West Shore

Excellent diversification

The 3 months correlation between Bank and West is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and West Shore Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Shore Bank 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 West Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Shore Bank has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and West Shore go up and down completely randomly.

Pair Corralation between Bank Mandiri and West Shore

Assuming the 90 days horizon Bank Mandiri is expected to generate 1.95 times less return on investment than West Shore. In addition to that, Bank Mandiri is 4.51 times more volatile than West Shore Bank. It trades about 0.01 of its total potential returns per unit of risk. West Shore Bank is currently generating about 0.05 per unit of volatility. If you would invest  2,405  in West Shore Bank on September 23, 2024 and sell it today you would earn a total of  120.00  from holding West Shore Bank or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.43%
Values	Daily Returns

Bank Mandiri Persero  vs.  West Shore Bank

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 unsteady 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.

West Shore Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Shore Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, West Shore is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bank Mandiri and West Shore

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

The idea behind Bank Mandiri Persero and West Shore Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.