Correlation Between Bank Mandiri and Nu Med

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

Diversification Opportunities for Bank Mandiri and Nu Med

0.82

Correlation Coefficient

Bank Mandiri  Nu Med

Very poor diversification

The 3 months correlation between Bank and NUMD is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Nu Med Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Med Plus 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 Nu Med. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Med Plus has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Nu Med go up and down completely randomly.

Pair Corralation between Bank Mandiri and Nu Med

Assuming the 90 days horizon Bank Mandiri is expected to generate 23.32 times less return on investment than Nu Med. But when comparing it to its historical volatility, Bank Mandiri Persero is 8.32 times less risky than Nu Med. It trades about 0.02 of its potential returns per unit of risk. Nu Med Plus is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Nu Med Plus on October 5, 2024 and sell it today you would lose (0.06) from holding Nu Med Plus or give up 3.75% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Nu Med Plus

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nu Med Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Med Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bank Mandiri and Nu Med

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

The idea behind Bank Mandiri Persero and Nu Med Plus 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.