Correlation Between Bank Mandiri and Link Reservations

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

Diversification Opportunities for Bank Mandiri and Link Reservations

0.71

Correlation Coefficient

Bank Mandiri  Link Reservations

Poor diversification

The 3 months correlation between Bank and Link is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Link Reservations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Link Reservations 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 Link Reservations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Link Reservations has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Link Reservations go up and down completely randomly.

Pair Corralation between Bank Mandiri and Link Reservations

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Link Reservations. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 11.73 times less risky than Link Reservations. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Link Reservations is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.28  in Link Reservations on August 31, 2024 and sell it today you would lose (0.18) from holding Link Reservations or give up 64.29% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Link Reservations

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 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.

Link Reservations

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Link Reservations are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Link Reservations showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Link Reservations

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

The idea behind Bank Mandiri Persero and Link Reservations 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.