Correlation Between Bank Mandiri and Brother Industries

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

Diversification Opportunities for Bank Mandiri and Brother Industries

0.15

Correlation Coefficient

Bank Mandiri  Brother Industries

Average diversification

The 3 months correlation between Bank and Brother is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Brother Industries go up and down completely randomly.

Pair Corralation between Bank Mandiri and Brother Industries

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Brother Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.65 times less risky than Brother Industries. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Brother Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,605  in Brother Industries on December 28, 2024 and sell it today you would earn a total of  247.00  from holding Brother Industries or generate 15.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bank Mandiri Persero  vs.  Brother Industries

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Brother Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brother Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Brother Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Brother Industries

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

The idea behind Bank Mandiri Persero and Brother Industries 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.