Correlation Between Bank Mandiri and MGC Pharmaceuticals

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

Diversification Opportunities for Bank Mandiri and MGC Pharmaceuticals

0.86

Correlation Coefficient

Bank Mandiri  MGC Pharmaceuticals

Very poor diversification

The 3 months correlation between Bank and MGC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and MGC Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGC Pharmaceuticals 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 MGC Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGC Pharmaceuticals has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and MGC Pharmaceuticals go up and down completely randomly.

Pair Corralation between Bank Mandiri and MGC Pharmaceuticals

If you would invest  21.00  in MGC Pharmaceuticals on September 16, 2024 and sell it today you would earn a total of  0.00  from holding MGC Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.54%
Values	Daily Returns

Bank Mandiri Persero  vs.  MGC Pharmaceuticals

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 weak 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.

MGC Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGC Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, MGC Pharmaceuticals 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 MGC Pharmaceuticals

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

The idea behind Bank Mandiri Persero and MGC Pharmaceuticals 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.