Correlation Between Bank Mandiri and Pharma Bio

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

Diversification Opportunities for Bank Mandiri and Pharma Bio

0.81

Correlation Coefficient

Bank Mandiri  Pharma Bio

Very poor diversification

The 3 months correlation between Bank and Pharma is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Pharma Bio Serv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Bio Serv 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 Pharma Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Bio Serv has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Pharma Bio go up and down completely randomly.

Pair Corralation between Bank Mandiri and Pharma Bio

Assuming the 90 days horizon Bank Mandiri is expected to generate 3.38 times less return on investment than Pharma Bio. But when comparing it to its historical volatility, Bank Mandiri Persero is 3.98 times less risky than Pharma Bio. It trades about 0.04 of its potential returns per unit of risk. Pharma Bio Serv is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  69.00  in Pharma Bio Serv on September 13, 2024 and sell it today you would lose (8.00) from holding Pharma Bio Serv or give up 11.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.52%
Values	Daily Returns

Bank Mandiri Persero  vs.  Pharma Bio Serv

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.

Pharma Bio Serv

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Bio Serv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pharma Bio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Mandiri and Pharma Bio

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

The idea behind Bank Mandiri Persero and Pharma Bio Serv 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.