Correlation Between BANK MANDIRI and Johnson Electric

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

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

Diversification Opportunities for BANK MANDIRI and Johnson Electric

-0.72

Correlation Coefficient

BANK MANDIRI  Johnson Electric

Pay attention - limited upside

The 3 months correlation between BANK and Johnson is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Johnson Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Electric Holdings 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 Johnson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Electric Holdings has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and Johnson Electric go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Johnson Electric

Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 0.77 times more return on investment than Johnson Electric. However, BANK MANDIRI is 1.3 times less risky than Johnson Electric. It trades about 0.25 of its potential returns per unit of risk. Johnson Electric Holdings is currently generating about -0.09 per unit of risk. If you would invest  32.00  in BANK MANDIRI on October 22, 2024 and sell it today you would earn a total of  1.00  from holding BANK MANDIRI or generate 3.13% return on investment over 90 days.

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

BANK MANDIRI  vs.  Johnson Electric Holdings

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.

Johnson Electric Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Electric Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Johnson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK MANDIRI and Johnson Electric

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

The idea behind BANK MANDIRI and Johnson Electric Holdings 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.