Correlation Between BANK RAKYAT and Territorial Bancorp

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Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and Territorial Bancorp 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 Territorial Bancorp 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 Territorial Bancorp, you can compare the effects of market volatilities on BANK RAKYAT and Territorial Bancorp 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 Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Territorial Bancorp.

Diversification Opportunities for BANK RAKYAT and Territorial Bancorp

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between BANK and Territorial is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp 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 Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Territorial Bancorp go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Territorial Bancorp

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Territorial Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.16 times less risky than Territorial Bancorp. The stock trades about -0.05 of its potential returns per unit of risk. The Territorial Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  939.00  in Territorial Bancorp on September 5, 2024 and sell it today you would earn a total of  61.00  from holding Territorial Bancorp or generate 6.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BANK RAKYAT IND  vs.  Territorial Bancorp

 Performance 
       Timeline  
BANK RAKYAT IND 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BANK RAKYAT IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Territorial Bancorp 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Territorial Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

BANK RAKYAT and Territorial Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BANK RAKYAT and Territorial Bancorp

The main advantage of trading using opposite BANK RAKYAT and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK RAKYAT position performs unexpectedly, Territorial Bancorp 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 Territorial Bancorp will offset losses from the drop in Territorial Bancorp's long position.
The idea behind BANK RAKYAT IND and Territorial Bancorp 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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