Correlation Between BANK MANDIRI and RCI Hospitality

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

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

Diversification Opportunities for BANK MANDIRI and RCI Hospitality

-0.83

Correlation Coefficient

BANK MANDIRI  RCI Hospitality

Pay attention - limited upside

The 3 months correlation between BANK and RCI is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and RCI Hospitality go up and down completely randomly.

Pair Corralation between BANK MANDIRI and RCI Hospitality

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the RCI Hospitality. In addition to that, BANK MANDIRI is 1.73 times more volatile than RCI Hospitality Holdings. It trades about -0.03 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about 0.25 per unit of volatility. If you would invest  3,944  in RCI Hospitality Holdings on October 6, 2024 and sell it today you would earn a total of  1,506  from holding RCI Hospitality Holdings or generate 38.18% return on investment over 90 days.

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

BANK MANDIRI  vs.  RCI Hospitality 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.

RCI Hospitality Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RCI Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK MANDIRI and RCI Hospitality

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

The idea behind BANK MANDIRI and RCI Hospitality 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.