Correlation Between BANK MANDIRI and Starbucks

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

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

Diversification Opportunities for BANK MANDIRI and Starbucks

-0.37

Correlation Coefficient

BANK MANDIRI  Starbucks

Very good diversification

The 3 months correlation between BANK and Starbucks is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and Starbucks go up and down completely randomly.

Pair Corralation between BANK MANDIRI and Starbucks

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the Starbucks. In addition to that, BANK MANDIRI is 3.21 times more volatile than Starbucks. It trades about -0.04 of its total potential returns per unit of risk. Starbucks is currently generating about 0.04 per unit of volatility. If you would invest  8,725  in Starbucks on October 5, 2024 and sell it today you would earn a total of  273.00  from holding Starbucks or generate 3.13% 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.  Starbucks

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 uncertain 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.

Starbucks

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Starbucks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Starbucks is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BANK MANDIRI and Starbucks

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

The idea behind BANK MANDIRI and Starbucks 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.