Correlation Between Bank Mandiri and Magellan Aerospace

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

Diversification Opportunities for Bank Mandiri and Magellan Aerospace

0.68

Correlation Coefficient

Bank Mandiri  Magellan Aerospace

Poor diversification

The 3 months correlation between Bank and Magellan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and Magellan Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Aerospace 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 Magellan Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Aerospace has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and Magellan Aerospace go up and down completely randomly.

Pair Corralation between Bank Mandiri and Magellan Aerospace

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the Magellan Aerospace. In addition to that, Bank Mandiri is 1.93 times more volatile than Magellan Aerospace. It trades about -0.08 of its total potential returns per unit of risk. Magellan Aerospace is currently generating about -0.03 per unit of volatility. If you would invest  592.00  in Magellan Aerospace on February 19, 2024 and sell it today you would lose (13.00) from holding Magellan Aerospace or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank Mandiri Persero  vs.  Magellan Aerospace

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 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.

Magellan Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magellan Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Magellan Aerospace is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Mandiri and Magellan Aerospace

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

The idea behind Bank Mandiri Persero and Magellan Aerospace 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.