Correlation Between RHB Bank and Hong Leong
Can any of the company-specific risk be diversified away by investing in both RHB Bank and Hong Leong 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 Hong Leong 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 Hong Leong Bank, you can compare the effects of market volatilities on RHB Bank and Hong Leong 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 Hong Leong. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Hong Leong.
Diversification Opportunities for RHB Bank and Hong Leong
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RHB and Hong is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Hong Leong Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Leong Bank 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 Hong Leong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Leong Bank has no effect on the direction of RHB Bank i.e., RHB Bank and Hong Leong go up and down completely randomly.
Pair Corralation between RHB Bank and Hong Leong
Assuming the 90 days trading horizon RHB Bank Bhd is expected to generate 0.88 times more return on investment than Hong Leong. However, RHB Bank Bhd is 1.13 times less risky than Hong Leong. It trades about 0.14 of its potential returns per unit of risk. Hong Leong Bank is currently generating about 0.06 per unit of risk. If you would invest 514.00 in RHB Bank Bhd on August 24, 2024 and sell it today you would earn a total of 135.00 from holding RHB Bank Bhd or generate 26.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RHB Bank Bhd vs. Hong Leong Bank
Performance |
| Timeline |
| RHB Bank Bhd |
| Hong Leong Bank |
RHB Bank and Hong Leong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RHB Bank and Hong Leong
The main advantage of trading using opposite RHB Bank and Hong Leong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Hong Leong 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 Hong Leong will offset losses from the drop in Hong Leong's long position.| RHB Bank vs. Malayan Banking Bhd | RHB Bank vs. Petronas Chemicals Group | RHB Bank vs. Malaysia Steel Works | RHB Bank vs. Hong Leong Bank |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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