Correlation Between Bank Mandiri and Southern Michigan

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

Diversification Opportunities for Bank Mandiri and Southern Michigan

-0.9

Correlation Coefficient

Bank Mandiri  Southern Michigan

Pay attention - limited upside

The 3 months correlation between Bank and Southern is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp 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 Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Southern Michigan go up and down completely randomly.

Pair Corralation between Bank Mandiri and Southern Michigan

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Southern Michigan. In addition to that, Bank Mandiri is 2.34 times more volatile than Southern Michigan Bancorp. It trades about -0.16 of its total potential returns per unit of risk. Southern Michigan Bancorp is currently generating about 0.25 per unit of volatility. If you would invest  1,685  in Southern Michigan Bancorp on September 15, 2024 and sell it today you would earn a total of  240.00  from holding Southern Michigan Bancorp or generate 14.24% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Southern Michigan Bancorp

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 fragile 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.

Southern Michigan Bancorp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Michigan Bancorp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Southern Michigan exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Southern Michigan

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

The idea behind Bank Mandiri Persero and Southern Michigan Bancorp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.