Correlation Between BANK MANDIRI and CRRC

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

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

Diversification Opportunities for BANK MANDIRI and CRRC

0.06

Correlation Coefficient

BANK MANDIRI  CRRC

Significant diversification

The 3 months correlation between BANK and CRRC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and CRRC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRRC Limited 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 CRRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRRC Limited has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and CRRC go up and down completely randomly.

Pair Corralation between BANK MANDIRI and CRRC

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 7.98 times less return on investment than CRRC. But when comparing it to its historical volatility, BANK MANDIRI is 1.92 times less risky than CRRC. It trades about 0.02 of its potential returns per unit of risk. CRRC Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15.00  in CRRC Limited on October 10, 2024 and sell it today you would earn a total of  46.00  from holding CRRC Limited or generate 306.67% return on investment over 90 days.

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

BANK MANDIRI  vs.  CRRC Limited

BANK MANDIRI

Risk-Adjusted Performance

0 of 100

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CRRC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BANK MANDIRI and CRRC

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

The idea behind BANK MANDIRI and CRRC Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.