Correlation Between Bank Mandiri and Citizens Bancshares

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

Diversification Opportunities for Bank Mandiri and Citizens Bancshares

-0.11

Correlation Coefficient

Bank Mandiri  Citizens Bancshares

Good diversification

The 3 months correlation between Bank and Citizens is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Citizens Bancshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancshares Corp 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 Citizens Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancshares Corp has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Citizens Bancshares go up and down completely randomly.

Pair Corralation between Bank Mandiri and Citizens Bancshares

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Citizens Bancshares. In addition to that, Bank Mandiri is 1.49 times more volatile than Citizens Bancshares Corp. It trades about -0.16 of its total potential returns per unit of risk. Citizens Bancshares Corp is currently generating about -0.01 per unit of volatility. If you would invest  5,400  in Citizens Bancshares Corp on November 28, 2024 and sell it today you would lose (76.00) from holding Citizens Bancshares Corp or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Bank Mandiri Persero  vs.  Citizens Bancshares Corp

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

Citizens Bancshares Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citizens Bancshares Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Citizens Bancshares is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank Mandiri and Citizens Bancshares

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

The idea behind Bank Mandiri Persero and Citizens Bancshares Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.