Correlation Between Bank Mandiri and Alumina Limited

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

Diversification Opportunities for Bank Mandiri and Alumina Limited

-0.61

Correlation Coefficient

Bank Mandiri  Alumina Limited

Excellent diversification

The 3 months correlation between Bank and Alumina is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Alumina Limited PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited PK 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 Alumina Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited PK has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Alumina Limited go up and down completely randomly.

Pair Corralation between Bank Mandiri and Alumina Limited

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Alumina Limited. In addition to that, Bank Mandiri is 1.11 times more volatile than Alumina Limited PK. It trades about -0.14 of its total potential returns per unit of risk. Alumina Limited PK is currently generating about 0.06 per unit of volatility. If you would invest  395.00  in Alumina Limited PK on February 3, 2024 and sell it today you would earn a total of  11.00  from holding Alumina Limited PK or generate 2.78% return on investment over 90 days.

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

Bank Mandiri Persero  vs.  Alumina Limited PK

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

Alumina Limited PK

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alumina Limited PK are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Alumina Limited showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Alumina Limited

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

The idea behind Bank Mandiri Persero and Alumina Limited PK 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.