Correlation Between Bank Mandiri and Direct Communication

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

Diversification Opportunities for Bank Mandiri and Direct Communication

-0.52

Correlation Coefficient

Bank Mandiri  Direct Communication

Excellent diversification

The 3 months correlation between Bank and Direct is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Direct Communication Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Communication 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 Direct Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Communication has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Direct Communication go up and down completely randomly.

Pair Corralation between Bank Mandiri and Direct Communication

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Direct Communication. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 3.79 times less risky than Direct Communication. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Direct Communication Solutions is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Direct Communication Solutions on September 23, 2024 and sell it today you would earn a total of  385.00  from holding Direct Communication Solutions or generate 308.0% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Direct Communication Solutions

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.

Direct Communication

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Communication Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Direct Communication showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Direct Communication

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

The idea behind Bank Mandiri Persero and Direct Communication Solutions 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.