Correlation Between Bank Mandiri and First National
Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and First National 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 First National 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 First National Energy, you can compare the effects of market volatilities on Bank Mandiri and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and First National.
Diversification Opportunities for Bank Mandiri and First National
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and First National go up and down completely randomly.
Pair Corralation between Bank Mandiri and First National
Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the First National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 5.37 times less risky than First National. The pink sheet trades about -0.09 of its potential returns per unit of risk. The First National Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4.71 in First National Energy on August 28, 2024 and sell it today you would earn a total of 4.35 from holding First National Energy or generate 92.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank Mandiri Persero vs. First National Energy
Performance |
| Timeline |
| Bank Mandiri Persero |
| First National Energy |
Bank Mandiri and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Mandiri and First National
The main advantage of trading using opposite Bank Mandiri and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.The idea behind Bank Mandiri Persero and First National Energy 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.| First National vs. TransAlta Corp | First National vs. Pampa Energia SA | First National vs. Vistra Energy Corp | First National vs. NRG Energy |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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