Correlation Between Bank Rakyat and Heineken
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and Heineken 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 Heineken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat and Heineken NV, you can compare the effects of market volatilities on Bank Rakyat and Heineken 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 Heineken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Heineken.
Diversification Opportunities for Bank Rakyat and Heineken
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Heineken is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV 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 Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Heineken go up and down completely randomly.
Pair Corralation between Bank Rakyat and Heineken
Assuming the 90 days horizon Bank Rakyat is expected to generate 1.26 times more return on investment than Heineken. However, Bank Rakyat is 1.26 times more volatile than Heineken NV. It trades about 0.01 of its potential returns per unit of risk. Heineken NV is currently generating about -0.02 per unit of risk. If you would invest 1,378 in Bank Rakyat on August 27, 2024 and sell it today you would lose (21.00) from holding Bank Rakyat or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Rakyat vs. Heineken NV
Performance |
| Timeline |
| Bank Rakyat |
| Heineken NV |
Bank Rakyat and Heineken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and Heineken
The main advantage of trading using opposite Bank Rakyat and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, Heineken 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 Heineken will offset losses from the drop in Heineken's long position.The idea behind Bank Rakyat and Heineken NV 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.| Heineken vs. Anheuser Busch InBev SANV | Heineken vs. Tsingtao Brewery Co | Heineken vs. Carlsberg AS | Heineken vs. Heineken NV |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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