Correlation Between Bank Mandiri and First Community

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

Diversification Opportunities for Bank Mandiri and First Community

-0.7

Correlation Coefficient

Bank Mandiri  First Community

Excellent diversification

The 3 months correlation between Bank and First is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and First Community go up and down completely randomly.

Pair Corralation between Bank Mandiri and First Community

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the First Community. In addition to that, Bank Mandiri is 2.74 times more volatile than First Community. It trades about -0.27 of its total potential returns per unit of risk. First Community is currently generating about 0.32 per unit of volatility. If you would invest  890.00  in First Community on September 27, 2024 and sell it today you would earn a total of  50.00  from holding First Community or generate 5.62% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  First Community

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.

First Community

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Community is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Mandiri and First Community

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

The idea behind Bank Mandiri Persero and First Community 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.