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

-0.36

Correlation Coefficient

BANK MANDIRI  Johnson Electric

Very good diversification

The 3 months correlation between BANK and Johnson is -0.36. 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 under-perform the Johnson Electric. In addition to that, BANK MANDIRI is 1.2 times more volatile than Johnson Electric Holdings. It trades about -0.06 of its total potential returns per unit of risk. Johnson Electric Holdings is currently generating about 0.1 per unit of volatility. If you would invest  117.00  in Johnson Electric Holdings on October 8, 2024 and sell it today you would earn a total of  17.00  from holding Johnson Electric Holdings or generate 14.53% 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.  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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Johnson Electric Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Electric Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.