Correlation Between Bank Mandiri and HomeStreet

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

Diversification Opportunities for Bank Mandiri and HomeStreet

0.59

Correlation Coefficient

Bank Mandiri  HomeStreet

Very weak diversification

The 3 months correlation between Bank and HomeStreet is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and HomeStreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeStreet 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 HomeStreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeStreet has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and HomeStreet go up and down completely randomly.

Pair Corralation between Bank Mandiri and HomeStreet

Assuming the 90 days horizon Bank Mandiri Persero is expected to generate 0.38 times more return on investment than HomeStreet. However, Bank Mandiri Persero is 2.63 times less risky than HomeStreet. It trades about 0.02 of its potential returns per unit of risk. HomeStreet is currently generating about -0.01 per unit of risk. If you would invest  1,223  in Bank Mandiri Persero on September 28, 2024 and sell it today you would earn a total of  175.00  from holding Bank Mandiri Persero or generate 14.31% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  HomeStreet

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.

HomeStreet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeStreet 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank Mandiri and HomeStreet

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

The idea behind Bank Mandiri Persero and HomeStreet 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.