Correlation Between BANK MANDIRI and International Business

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

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

Diversification Opportunities for BANK MANDIRI and International Business

-0.29

Correlation Coefficient

BANK MANDIRI  International Business

Very good diversification

The 3 months correlation between BANK and International is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and International Business go up and down completely randomly.

Pair Corralation between BANK MANDIRI and International Business

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 1.98 times less return on investment than International Business. In addition to that, BANK MANDIRI is 1.77 times more volatile than International Business Machines. It trades about 0.03 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.09 per unit of volatility. If you would invest  12,216  in International Business Machines on October 4, 2024 and sell it today you would earn a total of  8,984  from holding International Business Machines or generate 73.54% return on investment over 90 days.

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

BANK MANDIRI  vs.  International Business Machine

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.

International Business

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, International Business is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BANK MANDIRI and International Business

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

The idea behind BANK MANDIRI and International Business Machines 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.