Correlation Between Bank Mandiri and Sido Muncul

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

By analyzing existing cross correlation between Bank Mandiri Persero and Sido Muncul PT, you can compare the effects of market volatilities on Bank Mandiri and Sido Muncul 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 Sido Muncul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Sido Muncul.

Diversification Opportunities for Bank Mandiri and Sido Muncul

0.7

Correlation Coefficient

Bank Mandiri  Sido Muncul

Poor diversification

The 3 months correlation between Bank and Sido is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Sido Muncul PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sido Muncul PT 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 Persero are associated (or correlated) with Sido Muncul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sido Muncul PT has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Sido Muncul go up and down completely randomly.

Pair Corralation between Bank Mandiri and Sido Muncul

Assuming the 90 days trading horizon Bank Mandiri Persero is expected to under-perform the Sido Muncul. But the stock apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.27 times less risky than Sido Muncul. The stock trades about -0.05 of its potential returns per unit of risk. The Sido Muncul PT is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  61,000  in Sido Muncul PT on January 30, 2024 and sell it today you would earn a total of  9,500  from holding Sido Muncul PT or generate 15.57% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Sido Muncul PT

Bank Mandiri Persero

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Mandiri Persero are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bank Mandiri may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sido Muncul PT

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sido Muncul PT are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sido Muncul disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Sido Muncul

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

The idea behind Bank Mandiri Persero and Sido Muncul PT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.