Correlation Between Astra International and Bank Mandiri

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

By analyzing existing cross correlation between Astra International Tbk and Bank Mandiri Persero, you can compare the effects of market volatilities on Astra International and Bank Mandiri 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 Astra International with a short position of Bank Mandiri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra International and Bank Mandiri.

Diversification Opportunities for Astra International and Bank Mandiri

0.8

Correlation Coefficient

Astra International  Bank Mandiri

Very poor diversification

The 3 months correlation between Astra and Bank is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Bank Mandiri Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mandiri Persero and Astra International 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 Astra International Tbk are associated (or correlated) with Bank Mandiri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mandiri Persero has no effect on the direction of Astra International i.e., Astra International and Bank Mandiri go up and down completely randomly.

Pair Corralation between Astra International and Bank Mandiri

Assuming the 90 days horizon Astra International is expected to generate 1.36 times less return on investment than Bank Mandiri. But when comparing it to its historical volatility, Astra International Tbk is 2.27 times less risky than Bank Mandiri. It trades about 0.1 of its potential returns per unit of risk. Bank Mandiri Persero is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Bank Mandiri Persero on October 20, 2024 and sell it today you would earn a total of  1.00  from holding Bank Mandiri Persero or generate 2.86% return on investment over 90 days.

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

Astra International Tbk  vs.  Bank Mandiri Persero

Astra International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra International Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Astra International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank Mandiri Persero

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Astra International and Bank Mandiri

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

The idea behind Astra International Tbk and Bank Mandiri Persero 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.