Correlation Between BANK MANDIRI and NexGen Energy

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Can any of the company-specific risk be diversified away by investing in both BANK MANDIRI and NexGen Energy 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 NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK MANDIRI and NexGen Energy, you can compare the effects of market volatilities on BANK MANDIRI and NexGen Energy 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 NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK MANDIRI and NexGen Energy.

Diversification Opportunities for BANK MANDIRI and NexGen Energy

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between BANK and NexGen is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen 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 are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and NexGen Energy go up and down completely randomly.

Pair Corralation between BANK MANDIRI and NexGen Energy

Assuming the 90 days trading horizon BANK MANDIRI is expected to under-perform the NexGen Energy. But the stock apears to be less risky and, when comparing its historical volatility, BANK MANDIRI is 1.66 times less risky than NexGen Energy. The stock trades about -0.07 of its potential returns per unit of risk. The NexGen Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  526.00  in NexGen Energy on September 12, 2024 and sell it today you would earn a total of  259.00  from holding NexGen Energy or generate 49.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BANK MANDIRI  vs.  NexGen Energy

 Performance 
       Timeline  
BANK MANDIRI 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BANK MANDIRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
NexGen Energy 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NexGen Energy reported solid returns over the last few months and may actually be approaching a breakup point.

BANK MANDIRI and NexGen Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BANK MANDIRI and NexGen Energy

The main advantage of trading using opposite BANK MANDIRI and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK MANDIRI position performs unexpectedly, NexGen Energy 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.
The idea behind BANK MANDIRI and NexGen 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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