Correlation Between Bank Rakyat and West Red
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and West Red 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 West Red into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat and West Red Lake, you can compare the effects of market volatilities on Bank Rakyat and West Red 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 West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and West Red.
Diversification Opportunities for Bank Rakyat and West Red
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and West is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake 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 West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and West Red go up and down completely randomly.
Pair Corralation between Bank Rakyat and West Red
Assuming the 90 days horizon Bank Rakyat is expected to generate 0.56 times more return on investment than West Red. However, Bank Rakyat is 1.77 times less risky than West Red. It trades about 0.01 of its potential returns per unit of risk. West Red Lake is currently generating about -0.02 per unit of risk. If you would invest 1,326 in Bank Rakyat on September 5, 2024 and sell it today you would lose (9.00) from holding Bank Rakyat or give up 0.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Bank Rakyat vs. West Red Lake
Performance |
| Timeline |
| Bank Rakyat |
| West Red Lake |
Bank Rakyat and West Red Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and West Red
The main advantage of trading using opposite Bank Rakyat and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, West Red 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 West Red will offset losses from the drop in West Red's long position.| Bank Rakyat vs. First Hawaiian | Bank Rakyat vs. Central Pacific Financial | Bank Rakyat vs. Territorial Bancorp | Bank Rakyat vs. Comerica |
| West Red vs. Turning Point Brands | West Red vs. Tyson Foods | West Red vs. Fidus Investment Corp | West Red vs. Ambev SA ADR |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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