Correlation Between BANK MANDIRI and Otis Worldwide

Can any of the company-specific risk be diversified away by investing in both BANK MANDIRI and Otis Worldwide 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 Otis Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BANK MANDIRI and Otis Worldwide Corp, you can compare the effects of market volatilities on BANK MANDIRI and Otis Worldwide 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 Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK MANDIRI and Otis Worldwide.

Diversification Opportunities for BANK MANDIRI and Otis Worldwide

0.4

Correlation Coefficient

BANK MANDIRI  Otis Worldwide

Very weak diversification

The 3 months correlation between BANK and Otis is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Otis Worldwide Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide Corp 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 are associated (or correlated) with Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide Corp has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and Otis Worldwide go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Otis Worldwide

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the Otis Worldwide. In addition to that, BANK MANDIRI is 1.58 times more volatile than Otis Worldwide Corp. It trades about -0.15 of its total potential returns per unit of risk. Otis Worldwide Corp is currently generating about -0.05 per unit of volatility. If you would invest  9,633  in Otis Worldwide Corp on November 29, 2024 and sell it today you would lose (329.00) from holding Otis Worldwide Corp or give up 3.42% of portfolio value over 90 days.

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

BANK MANDIRI  vs.  Otis Worldwide Corp

BANK MANDIRI

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK MANDIRI 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 rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Otis Worldwide Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Otis Worldwide Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Otis Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK MANDIRI and Otis Worldwide

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

The idea behind BANK MANDIRI and Otis Worldwide Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.