Correlation Between RHB Bank and Kossan Rubber
Can any of the company-specific risk be diversified away by investing in both RHB Bank and Kossan Rubber 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 Kossan Rubber 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 Kossan Rubber Industries, you can compare the effects of market volatilities on RHB Bank and Kossan Rubber 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 Kossan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Kossan Rubber.
Diversification Opportunities for RHB Bank and Kossan Rubber
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RHB and Kossan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries 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 Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of RHB Bank i.e., RHB Bank and Kossan Rubber go up and down completely randomly.
Pair Corralation between RHB Bank and Kossan Rubber
Assuming the 90 days trading horizon RHB Bank is expected to generate 453.75 times less return on investment than Kossan Rubber. But when comparing it to its historical volatility, RHB Bank Bhd is 3.49 times less risky than Kossan Rubber. It trades about 0.0 of its potential returns per unit of risk. Kossan Rubber Industries is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 209.00 in Kossan Rubber Industries on August 24, 2024 and sell it today you would earn a total of 35.00 from holding Kossan Rubber Industries or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RHB Bank Bhd vs. Kossan Rubber Industries
Performance |
| Timeline |
| RHB Bank Bhd |
| Kossan Rubber Industries |
RHB Bank and Kossan Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RHB Bank and Kossan Rubber
The main advantage of trading using opposite RHB Bank and Kossan Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Kossan Rubber 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 Kossan Rubber will offset losses from the drop in Kossan Rubber's long position.The idea behind RHB Bank Bhd and Kossan Rubber Industries 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.| Kossan Rubber vs. Rubberex M | Kossan Rubber vs. Digistar Bhd | Kossan Rubber vs. Minetech Resources Bhd | Kossan Rubber vs. OpenSys M Bhd |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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