Correlation Between Bank Rakyat and STEP Energy
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and STEP Energy 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 STEP Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat and STEP Energy Services, you can compare the effects of market volatilities on Bank Rakyat and STEP Energy 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 STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and STEP Energy.
Diversification Opportunities for Bank Rakyat and STEP Energy
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and STEP is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and STEP Energy go up and down completely randomly.
Pair Corralation between Bank Rakyat and STEP Energy
Assuming the 90 days horizon Bank Rakyat is expected to generate 6.71 times less return on investment than STEP Energy. But when comparing it to its historical volatility, Bank Rakyat is 2.14 times less risky than STEP Energy. It trades about 0.01 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 365.00 in STEP Energy Services on September 2, 2024 and sell it today you would earn a total of 0.00 from holding STEP Energy Services or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank Rakyat vs. STEP Energy Services
Performance |
| Timeline |
| Bank Rakyat |
| STEP Energy Services |
Bank Rakyat and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and STEP Energy
The main advantage of trading using opposite Bank Rakyat and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, STEP Energy 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 STEP Energy will offset losses from the drop in STEP Energy's long position.| Bank Rakyat vs. Piraeus Bank SA | Bank Rakyat vs. Turkiye Garanti Bankasi | Bank Rakyat vs. Uwharrie Capital Corp |
| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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