Correlation Between RHB Bank and Telekom Malaysia
Can any of the company-specific risk be diversified away by investing in both RHB Bank and Telekom Malaysia 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 RHB Bank and Telekom Malaysia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RHB Bank Bhd and Telekom Malaysia Bhd, you can compare the effects of market volatilities on RHB Bank and Telekom Malaysia 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 RHB Bank with a short position of Telekom Malaysia. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Telekom Malaysia.
Diversification Opportunities for RHB Bank and Telekom Malaysia
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RHB and Telekom is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Telekom Malaysia Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telekom Malaysia Bhd and RHB Bank 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 RHB Bank Bhd are associated (or correlated) with Telekom Malaysia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telekom Malaysia Bhd has no effect on the direction of RHB Bank i.e., RHB Bank and Telekom Malaysia go up and down completely randomly.
Pair Corralation between RHB Bank and Telekom Malaysia
Assuming the 90 days trading horizon RHB Bank is expected to generate 1.41 times less return on investment than Telekom Malaysia. But when comparing it to its historical volatility, RHB Bank Bhd is 1.63 times less risky than Telekom Malaysia. It trades about 0.08 of its potential returns per unit of risk. Telekom Malaysia Bhd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 481.00 in Telekom Malaysia Bhd on September 17, 2024 and sell it today you would earn a total of 194.00 from holding Telekom Malaysia Bhd or generate 40.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RHB Bank Bhd vs. Telekom Malaysia Bhd
Performance |
| Timeline |
| RHB Bank Bhd |
| Telekom Malaysia Bhd |
RHB Bank and Telekom Malaysia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RHB Bank and Telekom Malaysia
The main advantage of trading using opposite RHB Bank and Telekom Malaysia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Telekom Malaysia 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 Telekom Malaysia will offset losses from the drop in Telekom Malaysia's long position.The idea behind RHB Bank Bhd and Telekom Malaysia Bhd 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.| Telekom Malaysia vs. Senheng New Retail | Telekom Malaysia vs. RHB Bank Bhd | Telekom Malaysia vs. Hong Leong Bank | Telekom Malaysia vs. Cosmos Technology International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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