Correlation Between BANK RAKYAT and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and Ambac Financial 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 Ambac Financial 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 Ambac Financial Group, you can compare the effects of market volatilities on BANK RAKYAT and Ambac Financial 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 Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Ambac Financial.
Diversification Opportunities for BANK RAKYAT and Ambac Financial
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BANK and Ambac is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Ambac Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambac Financial Group 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 Ambac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambac Financial Group has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Ambac Financial go up and down completely randomly.
Pair Corralation between BANK RAKYAT and Ambac Financial
Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Ambac Financial. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.28 times less risky than Ambac Financial. The stock trades about -0.21 of its potential returns per unit of risk. The Ambac Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,140 in Ambac Financial Group on September 22, 2024 and sell it today you would earn a total of 20.00 from holding Ambac Financial Group or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK RAKYAT IND vs. Ambac Financial Group
Performance |
| Timeline |
| BANK RAKYAT IND |
| Ambac Financial Group |
BANK RAKYAT and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK RAKYAT and Ambac Financial
The main advantage of trading using opposite BANK RAKYAT and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK RAKYAT position performs unexpectedly, Ambac Financial 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 Ambac Financial will offset losses from the drop in Ambac Financial's long position.| BANK RAKYAT vs. Apple Inc | BANK RAKYAT vs. Apple Inc | BANK RAKYAT vs. Apple Inc | BANK RAKYAT vs. Apple Inc |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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