Correlation Between Bank Mandiri and Shinhan Financial

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

Diversification Opportunities for Bank Mandiri and Shinhan Financial

0.68

Correlation Coefficient

Bank Mandiri  Shinhan Financial

Poor diversification

The 3 months correlation between Bank and Shinhan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan 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 Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Shinhan Financial go up and down completely randomly.

Pair Corralation between Bank Mandiri and Shinhan Financial

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Shinhan Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.52 times less risky than Shinhan Financial. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Shinhan Financial Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,549  in Shinhan Financial Group on January 28, 2024 and sell it today you would lose (133.00) from holding Shinhan Financial Group or give up 3.75% of portfolio value over 90 days.

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

Bank Mandiri Persero  vs.  Shinhan Financial Group

Bank Mandiri Persero

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Mandiri Persero are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shinhan Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Shinhan Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mandiri and Shinhan Financial

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

The idea behind Bank Mandiri Persero and Shinhan 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.