Correlation Between Bank Mandiri and Indo Kordsa

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

Diversification Opportunities for Bank Mandiri and Indo Kordsa

-0.29

Correlation Coefficient

Bank Mandiri  Indo Kordsa

Very good diversification

The 3 months correlation between Bank and Indo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Indo Kordsa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Kordsa Tbk 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 Indo Kordsa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Kordsa Tbk has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Indo Kordsa go up and down completely randomly.

Pair Corralation between Bank Mandiri and Indo Kordsa

Assuming the 90 days trading horizon Bank Mandiri Persero is expected to generate 1.09 times more return on investment than Indo Kordsa. However, Bank Mandiri is 1.09 times more volatile than Indo Kordsa Tbk. It trades about 0.06 of its potential returns per unit of risk. Indo Kordsa Tbk is currently generating about -0.04 per unit of risk. If you would invest  690,000  in Bank Mandiri Persero on February 2, 2024 and sell it today you would earn a total of  10,000  from holding Bank Mandiri Persero or generate 1.45% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Indo Kordsa Tbk

Bank Mandiri Persero

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Mandiri Persero are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bank Mandiri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indo Kordsa Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Kordsa Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Indo Kordsa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Mandiri and Indo Kordsa

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

The idea behind Bank Mandiri Persero and Indo Kordsa Tbk 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.