Correlation Between Bank Mandiri and Arkema SA

Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and Arkema SA 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 Arkema SA 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 Arkema SA ADR, you can compare the effects of market volatilities on Bank Mandiri and Arkema SA 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 Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and Arkema SA.

Diversification Opportunities for Bank Mandiri and Arkema SA

-0.41

Correlation Coefficient

Bank Mandiri  Arkema SA

Very good diversification

The 3 months correlation between Bank and Arkema is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Arkema SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA 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 Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA ADR has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Arkema SA go up and down completely randomly.

Pair Corralation between Bank Mandiri and Arkema SA

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Arkema SA. In addition to that, Bank Mandiri is 1.04 times more volatile than Arkema SA ADR. It trades about -0.1 of its total potential returns per unit of risk. Arkema SA ADR is currently generating about -0.04 per unit of volatility. If you would invest  10,493  in Arkema SA ADR on January 30, 2024 and sell it today you would lose (174.00) from holding Arkema SA ADR or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Bank Mandiri Persero  vs.  Arkema SA ADR

Bank Mandiri Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mandiri Persero has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bank Mandiri is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Arkema SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arkema SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank Mandiri and Arkema SA

The main advantage of trading using opposite Bank Mandiri and Arkema SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, Arkema SA 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 Arkema SA will offset losses from the drop in Arkema SA's long position.

The idea behind Bank Mandiri Persero and Arkema SA 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.