Correlation Between Bank Mandiri and Orkla ASA

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

Diversification Opportunities for Bank Mandiri and Orkla ASA

0.4

Correlation Coefficient

Bank Mandiri  Orkla ASA

Very weak diversification

The 3 months correlation between Bank and Orkla is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Orkla ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orkla ASA ADR 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 Orkla ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orkla ASA ADR has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Orkla ASA go up and down completely randomly.

Pair Corralation between Bank Mandiri and Orkla ASA

Assuming the 90 days horizon Bank Mandiri is expected to generate 1.43 times less return on investment than Orkla ASA. In addition to that, Bank Mandiri is 1.45 times more volatile than Orkla ASA ADR. It trades about 0.04 of its total potential returns per unit of risk. Orkla ASA ADR is currently generating about 0.09 per unit of volatility. If you would invest  806.00  in Orkla ASA ADR on September 1, 2024 and sell it today you would earn a total of  118.00  from holding Orkla ASA ADR or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Bank Mandiri Persero  vs.  Orkla ASA ADR

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Orkla ASA ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Orkla ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Mandiri and Orkla ASA

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

The idea behind Bank Mandiri Persero and Orkla ASA ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.