Correlation Between Bank Mandiri and KB Financial

Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and KB Financial 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 KB Financial 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 KB Financial Group, you can compare the effects of market volatilities on Bank Mandiri and KB Financial 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 KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and KB Financial.

Diversification Opportunities for Bank Mandiri and KB Financial

0.48

Correlation Coefficient

Bank Mandiri  KB Financial

Very weak diversification

The 3 months correlation between Bank and KB Financial is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group 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 KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and KB Financial go up and down completely randomly.

Pair Corralation between Bank Mandiri and KB Financial

Assuming the 90 days horizon Bank Mandiri Persero is expected to generate 0.85 times more return on investment than KB Financial. However, Bank Mandiri Persero is 1.18 times less risky than KB Financial. It trades about 0.06 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.03 per unit of risk. If you would invest  1,014  in Bank Mandiri Persero on February 4, 2024 and sell it today you would earn a total of  530.00  from holding Bank Mandiri Persero or generate 52.27% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  KB Financial Group

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KB Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, KB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and KB Financial

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

The idea behind Bank Mandiri Persero and KB Financial Group 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.