Correlation Between Bank Mandiri and Citic
Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and Citic 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 Citic 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 Citic Ltd ADR, you can compare the effects of market volatilities on Bank Mandiri and Citic 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 Citic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Citic.
Diversification Opportunities for Bank Mandiri and Citic
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Citic is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Citic Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Ltd ADR 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 Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Ltd ADR has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Citic go up and down completely randomly.
Pair Corralation between Bank Mandiri and Citic
Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Citic. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.23 times less risky than Citic. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Citic Ltd ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 615.00 in Citic Ltd ADR on August 29, 2024 and sell it today you would lose (8.00) from holding Citic Ltd ADR or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Mandiri Persero vs. Citic Ltd ADR
Performance |
| Timeline |
| Bank Mandiri Persero |
| Citic Ltd ADR |
Bank Mandiri and Citic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Mandiri and Citic
The main advantage of trading using opposite Bank Mandiri and Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, Citic 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 Citic will offset losses from the drop in Citic's long position.The idea behind Bank Mandiri Persero and Citic Ltd ADR 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.| Citic vs. Honeywell International | Citic vs. MDU Resources Group | Citic vs. Compass Diversified Holdings | Citic vs. Valmont Industries |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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