Correlation Between Bank Mandiri and Penn National

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

Diversification Opportunities for Bank Mandiri and Penn National

0.32

Correlation Coefficient

Bank Mandiri  Penn National

Weak diversification

The 3 months correlation between Bank and Penn is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Penn National go up and down completely randomly.

Pair Corralation between Bank Mandiri and Penn National

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Penn National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.02 times less risky than Penn National. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Penn National Gaming is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,873  in Penn National Gaming on December 28, 2024 and sell it today you would lose (161.00) from holding Penn National Gaming or give up 8.6% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Penn National Gaming

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.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bank Mandiri and Penn National

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

The idea behind Bank Mandiri Persero and Penn National Gaming 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.