Correlation Between Bank Mandiri and Fentura Financial

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

Diversification Opportunities for Bank Mandiri and Fentura Financial

-0.78

Correlation Coefficient

Bank Mandiri  Fentura Financial

Pay attention - limited upside

The 3 months correlation between Bank and Fentura is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Fentura Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fentura Financial 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 Fentura Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fentura Financial has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Fentura Financial go up and down completely randomly.

Pair Corralation between Bank Mandiri and Fentura Financial

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Fentura Financial. In addition to that, Bank Mandiri is 1.46 times more volatile than Fentura Financial. It trades about -0.33 of its total potential returns per unit of risk. Fentura Financial is currently generating about -0.21 per unit of volatility. If you would invest  4,650  in Fentura Financial on October 8, 2024 and sell it today you would lose (250.00) from holding Fentura Financial or give up 5.38% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Fentura Financial

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

Fentura Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Fentura Financial

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

The idea behind Bank Mandiri Persero and Fentura Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.