Correlation Between Bank Mandiri and OSI Systems

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

Diversification Opportunities for Bank Mandiri and OSI Systems

-0.39

Correlation Coefficient

Bank Mandiri  OSI Systems

Very good diversification

The 3 months correlation between Bank and OSI is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and OSI Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSI Systems 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 OSI Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSI Systems has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and OSI Systems go up and down completely randomly.

Pair Corralation between Bank Mandiri and OSI Systems

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the OSI Systems. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.01 times less risky than OSI Systems. The pink sheet trades about -0.06 of its potential returns per unit of risk. The OSI Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17,135  in OSI Systems on December 27, 2024 and sell it today you would earn a total of  2,776  from holding OSI Systems or generate 16.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Bank Mandiri Persero  vs.  OSI Systems

Bank Mandiri Persero

Risk-Adjusted Performance

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.

OSI Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and OSI Systems

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

The idea behind Bank Mandiri Persero and OSI Systems 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.