Correlation Between BANK MANDIRI and LIFEWAY FOODS
Can any of the company-specific risk be diversified away by investing in both BANK MANDIRI and LIFEWAY FOODS 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 LIFEWAY FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK MANDIRI and LIFEWAY FOODS, you can compare the effects of market volatilities on BANK MANDIRI and LIFEWAY FOODS 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 LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK MANDIRI and LIFEWAY FOODS.
Diversification Opportunities for BANK MANDIRI and LIFEWAY FOODS
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANK and LIFEWAY is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BANK MANDIRI and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of BANK MANDIRI i.e., BANK MANDIRI and LIFEWAY FOODS go up and down completely randomly.
Pair Corralation between BANK MANDIRI and LIFEWAY FOODS
Assuming the 90 days trading horizon BANK MANDIRI is expected to generate 1.05 times more return on investment than LIFEWAY FOODS. However, BANK MANDIRI is 1.05 times more volatile than LIFEWAY FOODS. It trades about 0.01 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about -0.07 per unit of risk. If you would invest 35.00 in BANK MANDIRI on October 20, 2024 and sell it today you would earn a total of 0.00 from holding BANK MANDIRI or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK MANDIRI vs. LIFEWAY FOODS
Performance |
| Timeline |
| BANK MANDIRI |
| LIFEWAY FOODS |
BANK MANDIRI and LIFEWAY FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK MANDIRI and LIFEWAY FOODS
The main advantage of trading using opposite BANK MANDIRI and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK MANDIRI position performs unexpectedly, LIFEWAY FOODS 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 LIFEWAY FOODS will offset losses from the drop in LIFEWAY FOODS's long position.| BANK MANDIRI vs. Apple Inc | BANK MANDIRI vs. Apple Inc | BANK MANDIRI vs. Apple Inc | BANK MANDIRI vs. Apple Inc |
| LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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