Correlation Between Bank Mandiri and Discover Financial

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

Diversification Opportunities for Bank Mandiri and Discover Financial

-0.73

Correlation Coefficient

Bank Mandiri  Discover Financial

Pay attention - limited upside

The 3 months correlation between Bank and Discover is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Discover Financial go up and down completely randomly.

Pair Corralation between Bank Mandiri and Discover Financial

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Discover Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.1 times less risky than Discover Financial. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  18,255  in Discover Financial Services on May 1, 2025 and sell it today you would earn a total of  1,750  from holding Discover Financial Services or generate 9.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.97%
Values	Daily Returns

Bank Mandiri Persero  vs.  Discover Financial Services

Bank Mandiri Persero

Risk-Adjusted Performance

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 fairly strong basic indicators, Bank Mandiri is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Discover Financial

Risk-Adjusted Performance

Solid

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Discover Financial

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

The idea behind Bank Mandiri Persero and Discover Financial Services 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.