Correlation Between RHB Bank and Central Industrial
Can any of the company-specific risk be diversified away by investing in both RHB Bank and Central Industrial 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 Central Industrial 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 Central Industrial Corp, you can compare the effects of market volatilities on RHB Bank and Central Industrial 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 Central Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Central Industrial.
Diversification Opportunities for RHB Bank and Central Industrial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RHB and Central is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Central Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Industrial Corp 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 Central Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Industrial Corp has no effect on the direction of RHB Bank i.e., RHB Bank and Central Industrial go up and down completely randomly.
Pair Corralation between RHB Bank and Central Industrial
Assuming the 90 days trading horizon RHB Bank Bhd is expected to generate 1.24 times more return on investment than Central Industrial. However, RHB Bank is 1.24 times more volatile than Central Industrial Corp. It trades about 0.14 of its potential returns per unit of risk. Central Industrial Corp is currently generating about 0.08 per unit of risk. If you would invest 609.00 in RHB Bank Bhd on September 12, 2024 and sell it today you would earn a total of 50.00 from holding RHB Bank Bhd or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
RHB Bank Bhd vs. Central Industrial Corp
Performance |
| Timeline |
| RHB Bank Bhd |
| Central Industrial Corp |
RHB Bank and Central Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RHB Bank and Central Industrial
The main advantage of trading using opposite RHB Bank and Central Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Central Industrial 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 Central Industrial will offset losses from the drop in Central Industrial's long position.| RHB Bank vs. CSC Steel Holdings | RHB Bank vs. Sungei Bagan Rubber | RHB Bank vs. Sunway Construction Group | RHB Bank vs. PMB Technology Bhd |
| Central Industrial vs. Sunway Construction Group | Central Industrial vs. PESTECH International Bhd | Central Industrial vs. Ho Hup Construction | Central Industrial vs. Mercury Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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