Correlation Between BANK RAKYAT and First American
Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and First American 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 First American 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 First American Financial, you can compare the effects of market volatilities on BANK RAKYAT and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and First American.
Diversification Opportunities for BANK RAKYAT and First American
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BANK and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and First American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Financial 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Financial has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and First American go up and down completely randomly.
Pair Corralation between BANK RAKYAT and First American
Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 0.73 times more return on investment than First American. However, BANK RAKYAT IND is 1.37 times less risky than First American. It trades about 0.24 of its potential returns per unit of risk. First American Financial is currently generating about -0.27 per unit of risk. If you would invest 24.00 in BANK RAKYAT IND on October 7, 2024 and sell it today you would earn a total of 1.00 from holding BANK RAKYAT IND or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK RAKYAT IND vs. First American Financial
Performance |
| Timeline |
| BANK RAKYAT IND |
| First American Financial |
BANK RAKYAT and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK RAKYAT and First American
The main advantage of trading using opposite BANK RAKYAT and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK RAKYAT position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| BANK RAKYAT vs. Fair Isaac Corp | BANK RAKYAT vs. Corsair Gaming | BANK RAKYAT vs. Meiko Electronics Co | BANK RAKYAT vs. Methode Electronics |
| First American vs. Sanyo Chemical Industries | First American vs. Entravision Communications | First American vs. Mitsui Chemicals | First American vs. Geely Automobile Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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