Correlation Between Bank Rakyat and North American
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and North American 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 Rakyat and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat and North American Financial, you can compare the effects of market volatilities on Bank Rakyat and North American 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 Rakyat with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and North American.
Diversification Opportunities for Bank Rakyat and North American
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and North is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and Bank Rakyat 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 Rakyat are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and North American go up and down completely randomly.
Pair Corralation between Bank Rakyat and North American
Assuming the 90 days horizon Bank Rakyat is expected to under-perform the North American. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.58 times less risky than North American. The pink sheet trades about -0.18 of its potential returns per unit of risk. The North American Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 487.00 in North American Financial on August 28, 2024 and sell it today you would earn a total of 59.00 from holding North American Financial or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank Rakyat vs. North American Financial
Performance |
| Timeline |
| Bank Rakyat |
| North American Financial |
Bank Rakyat and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and North American
The main advantage of trading using opposite Bank Rakyat and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.The idea behind Bank Rakyat and North American Financial 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.| North American vs. Financial 15 Split | North American vs. Clough Global Ef | North American vs. Morgan Stanley India | North American vs. SEI Investments |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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