Correlation Between Bank Mandiri and China Minsh

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

Diversification Opportunities for Bank Mandiri and China Minsh

-0.3

Correlation Coefficient

Bank Mandiri  China Minsh

Very good diversification

The 3 months correlation between Bank and China is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and China Minsh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minsh 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 China Minsh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minsh has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and China Minsh go up and down completely randomly.

Pair Corralation between Bank Mandiri and China Minsh

Assuming the 90 days horizon Bank Mandiri is expected to generate 5.96 times less return on investment than China Minsh. But when comparing it to its historical volatility, Bank Mandiri Persero is 3.88 times less risky than China Minsh. It trades about 0.03 of its potential returns per unit of risk. China Minsh is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  334.00  in China Minsh on September 26, 2024 and sell it today you would earn a total of  64.00  from holding China Minsh or generate 19.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.08%
Values	Daily Returns

Bank Mandiri Persero  vs.  China Minsh

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

China Minsh

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minsh are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, China Minsh may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Mandiri and China Minsh

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

The idea behind Bank Mandiri Persero and China Minsh 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.