Correlation Between Bank Mandiri and Legal General
Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and Legal General 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 Legal General 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 Legal General Group, you can compare the effects of market volatilities on Bank Mandiri and Legal General 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 Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Legal General.
Diversification Opportunities for Bank Mandiri and Legal General
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Legal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Legal General Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General Group 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 Legal General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legal General Group has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Legal General go up and down completely randomly.
Pair Corralation between Bank Mandiri and Legal General
Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Legal General. In addition to that, Bank Mandiri is 1.55 times more volatile than Legal General Group. It trades about -0.24 of its total potential returns per unit of risk. Legal General Group is currently generating about -0.18 per unit of volatility. If you would invest 1,531 in Legal General Group on August 28, 2024 and sell it today you would lose (123.00) from holding Legal General Group or give up 8.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Mandiri Persero vs. Legal General Group
Performance |
| Timeline |
| Bank Mandiri Persero |
| Legal General Group |
Bank Mandiri and Legal General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Mandiri and Legal General
The main advantage of trading using opposite Bank Mandiri and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, Legal General 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 Legal General will offset losses from the drop in Legal General's long position.The idea behind Bank Mandiri Persero and Legal General 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.| Legal General vs. Blackstone Group | Legal General vs. BlackRock | Legal General vs. Apollo Global Management | Legal General vs. Bank of New |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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