Correlation Between Bank Mandiri and Metro Pacific

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

Diversification Opportunities for Bank Mandiri and Metro Pacific

-0.72

Correlation Coefficient

Bank Mandiri  Metro Pacific

Pay attention - limited upside

The 3 months correlation between Bank and Metro is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Metro Pacific Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Pacific Investments 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 Metro Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Pacific Investments has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Metro Pacific go up and down completely randomly.

Pair Corralation between Bank Mandiri and Metro Pacific

Assuming the 90 days horizon Bank Mandiri is expected to generate 18.47 times less return on investment than Metro Pacific. But when comparing it to its historical volatility, Bank Mandiri Persero is 7.03 times less risky than Metro Pacific. It trades about 0.04 of its potential returns per unit of risk. Metro Pacific Investments is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4.90  in Metro Pacific Investments on September 4, 2024 and sell it today you would earn a total of  5.10  from holding Metro Pacific Investments or generate 104.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.77%
Values	Daily Returns

Bank Mandiri Persero  vs.  Metro Pacific Investments

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.

Metro Pacific Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Pacific Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Metro Pacific is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Mandiri and Metro Pacific

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

The idea behind Bank Mandiri Persero and Metro Pacific Investments 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.