Correlation Between BANK MANDIRI and Valero Energy

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

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

Diversification Opportunities for BANK MANDIRI and Valero Energy

0.23

Correlation Coefficient

BANK MANDIRI  Valero Energy

Modest diversification

The 3 months correlation between BANK and Valero is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and Valero Energy go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Valero Energy

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the Valero Energy. In addition to that, BANK MANDIRI is 1.4 times more volatile than Valero Energy. It trades about -0.17 of its total potential returns per unit of risk. Valero Energy is currently generating about -0.02 per unit of volatility. If you would invest  12,831  in Valero Energy on December 4, 2024 and sell it today you would lose (445.00) from holding Valero Energy or give up 3.47% of portfolio value over 90 days.

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

BANK MANDIRI  vs.  Valero Energy

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

Valero Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Valero Energy 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 Valero Energy

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

The idea behind BANK MANDIRI and Valero Energy 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.