Correlation Between Bank Mandiri and Absa Group

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

Diversification Opportunities for Bank Mandiri and Absa Group

0.26

Correlation Coefficient

Bank Mandiri  Absa Group

Modest diversification

The 3 months correlation between Bank and Absa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Absa Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group 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 Absa Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Absa Group go up and down completely randomly.

Pair Corralation between Bank Mandiri and Absa Group

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Absa Group. In addition to that, Bank Mandiri is 1.17 times more volatile than Absa Group Ltd. It trades about -0.12 of its total potential returns per unit of risk. Absa Group Ltd is currently generating about -0.02 per unit of volatility. If you would invest  2,120  in Absa Group Ltd on December 19, 2024 and sell it today you would lose (93.00) from holding Absa Group Ltd or give up 4.39% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Absa Group Ltd

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Absa Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absa Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Absa Group

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

The idea behind Bank Mandiri Persero and Absa Group Ltd 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.