Correlation Between Bank Mandiri and Hong Kong

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

Diversification Opportunities for Bank Mandiri and Hong Kong

-0.49

Correlation Coefficient

Bank Mandiri  Hong Kong

Very good diversification

The 3 months correlation between Bank and Hong is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Land has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Hong Kong go up and down completely randomly.

Pair Corralation between Bank Mandiri and Hong Kong

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Hong Kong. In addition to that, Bank Mandiri is 2.1 times more volatile than Hong Kong Land. It trades about -0.04 of its total potential returns per unit of risk. Hong Kong Land is currently generating about 0.06 per unit of volatility. If you would invest  2,147  in Hong Kong Land on December 28, 2024 and sell it today you would earn a total of  103.00  from holding Hong Kong Land or generate 4.8% 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.  Hong Kong Land

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hong Kong Land

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Hong Kong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Hong Kong

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

The idea behind Bank Mandiri Persero and Hong Kong Land 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.