Correlation Between BANK RAKYAT and LIFEWAY FOODS
Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and LIFEWAY FOODS 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 LIFEWAY FOODS 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 LIFEWAY FOODS, you can compare the effects of market volatilities on BANK RAKYAT and LIFEWAY FOODS 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 LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and LIFEWAY FOODS.
Diversification Opportunities for BANK RAKYAT and LIFEWAY FOODS
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANK and LIFEWAY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and LIFEWAY FOODS go up and down completely randomly.
Pair Corralation between BANK RAKYAT and LIFEWAY FOODS
Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the LIFEWAY FOODS. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.13 times less risky than LIFEWAY FOODS. The stock trades about -0.1 of its potential returns per unit of risk. The LIFEWAY FOODS is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,200 in LIFEWAY FOODS on October 20, 2024 and sell it today you would lose (80.00) from holding LIFEWAY FOODS or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
BANK RAKYAT IND vs. LIFEWAY FOODS
Performance |
| Timeline |
| BANK RAKYAT IND |
| LIFEWAY FOODS |
BANK RAKYAT and LIFEWAY FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK RAKYAT and LIFEWAY FOODS
The main advantage of trading using opposite BANK RAKYAT and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK RAKYAT position performs unexpectedly, LIFEWAY FOODS 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 LIFEWAY FOODS will offset losses from the drop in LIFEWAY FOODS's long position.| BANK RAKYAT vs. Singapore Telecommunications Limited | BANK RAKYAT vs. Harmony Gold Mining | BANK RAKYAT vs. INTERSHOP Communications Aktiengesellschaft | BANK RAKYAT vs. GALENA MINING LTD |
| LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc | LIFEWAY FOODS vs. Apple Inc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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