Correlation Between BANK MANDIRI and KGHM Polska

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

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

Diversification Opportunities for BANK MANDIRI and KGHM Polska

0.74

Correlation Coefficient

BANK MANDIRI  KGHM Polska

Poor diversification

The 3 months correlation between BANK and KGHM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz 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 KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and KGHM Polska go up and down completely randomly.

Pair Corralation between BANK MANDIRI and KGHM Polska

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the KGHM Polska. But the stock apears to be less risky and, when comparing its historical volatility, BANK MANDIRI is 1.17 times less risky than KGHM Polska. The stock trades about -0.14 of its potential returns per unit of risk. The KGHM Polska Miedz is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,420  in KGHM Polska Miedz on September 20, 2024 and sell it today you would lose (551.00) from holding KGHM Polska Miedz or give up 16.11% of portfolio value over 90 days.

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

BANK MANDIRI  vs.  KGHM Polska Miedz

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BANK MANDIRI and KGHM Polska

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

The idea behind BANK MANDIRI and KGHM Polska Miedz 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.