Correlation Between Bank Mandiri and Sanlam

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

Diversification Opportunities for Bank Mandiri and Sanlam

0.74

Correlation Coefficient

Bank Mandiri  Sanlam

Poor diversification

The 3 months correlation between Bank and Sanlam is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Sanlam go up and down completely randomly.

Pair Corralation between Bank Mandiri and Sanlam

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Sanlam. In addition to that, Bank Mandiri is 1.17 times more volatile than Sanlam Ltd PK. It trades about -0.09 of its total potential returns per unit of risk. Sanlam Ltd PK is currently generating about -0.09 per unit of volatility. If you would invest  1,011  in Sanlam Ltd PK on October 26, 2024 and sell it today you would lose (112.00) from holding Sanlam Ltd PK or give up 11.08% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Sanlam Ltd PK

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.

Sanlam Ltd PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanlam Ltd PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank Mandiri and Sanlam

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

The idea behind Bank Mandiri Persero and Sanlam Ltd PK 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.