Correlation Between BANK RAKYAT and BANGCHAK P
Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and BANGCHAK P 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 BANGCHAK P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK RAKYAT IND and BANGCHAK P FGN , you can compare the effects of market volatilities on BANK RAKYAT and BANGCHAK P 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 BANGCHAK P. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and BANGCHAK P.
Diversification Opportunities for BANK RAKYAT and BANGCHAK P
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BANK and BANGCHAK is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and BANGCHAK P FGN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANGCHAK P FGN 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 IND are associated (or correlated) with BANGCHAK P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANGCHAK P FGN has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and BANGCHAK P go up and down completely randomly.
Pair Corralation between BANK RAKYAT and BANGCHAK P
Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 0.82 times more return on investment than BANGCHAK P. However, BANK RAKYAT IND is 1.22 times less risky than BANGCHAK P. It trades about -0.14 of its potential returns per unit of risk. BANGCHAK P FGN is currently generating about -0.12 per unit of risk. If you would invest 24.00 in BANK RAKYAT IND on September 21, 2024 and sell it today you would lose (2.00) from holding BANK RAKYAT IND or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK RAKYAT IND vs. BANGCHAK P FGN
Performance |
| Timeline |
| BANK RAKYAT IND |
| BANGCHAK P FGN |
BANK RAKYAT and BANGCHAK P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK RAKYAT and BANGCHAK P
The main advantage of trading using opposite BANK RAKYAT and BANGCHAK P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK RAKYAT position performs unexpectedly, BANGCHAK P 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 BANGCHAK P will offset losses from the drop in BANGCHAK P's long position.The idea behind BANK RAKYAT IND and BANGCHAK P FGN 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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