Correlation Between Bank Mandiri and KBC Group

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

Diversification Opportunities for Bank Mandiri and KBC Group

0.01

Correlation Coefficient

Bank Mandiri  KBC Group

Significant diversification

The 3 months correlation between Bank and KBC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and KBC Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Group NV 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 KBC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Group NV has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and KBC Group go up and down completely randomly.

Pair Corralation between Bank Mandiri and KBC Group

Assuming the 90 days horizon Bank Mandiri is expected to generate 4.16 times less return on investment than KBC Group. But when comparing it to its historical volatility, Bank Mandiri Persero is 2.22 times less risky than KBC Group. It trades about 0.02 of its potential returns per unit of risk. KBC Group NV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,177  in KBC Group NV on October 15, 2024 and sell it today you would earn a total of  1,589  from holding KBC Group NV or generate 25.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.62%
Values	Daily Returns

Bank Mandiri Persero  vs.  KBC Group NV

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.

KBC Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBC Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KBC Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Mandiri and KBC Group

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

The idea behind Bank Mandiri Persero and KBC Group NV 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 Commodity Directory module to find actively traded commodities issued by global exchanges.