Correlation Between RHB Bank and Ta Ann

Can any of the company-specific risk be diversified away by investing in both RHB Bank and Ta Ann 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 RHB Bank and Ta Ann into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RHB Bank Bhd and Ta Ann Holdings, you can compare the effects of market volatilities on RHB Bank and Ta Ann 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 RHB Bank with a short position of Ta Ann. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Ta Ann.

Diversification Opportunities for RHB Bank and Ta Ann

0.84

Correlation Coefficient

RHB Bank  Ta Ann

Very poor diversification

The 3 months correlation between RHB and 5012 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Ta Ann Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Ann Holdings and RHB Bank 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 RHB Bank Bhd are associated (or correlated) with Ta Ann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Ann Holdings has no effect on the direction of RHB Bank i.e., RHB Bank and Ta Ann go up and down completely randomly.

Pair Corralation between RHB Bank and Ta Ann

Assuming the 90 days trading horizon RHB Bank is expected to generate 2.51 times less return on investment than Ta Ann. But when comparing it to its historical volatility, RHB Bank Bhd is 1.73 times less risky than Ta Ann. It trades about 0.12 of its potential returns per unit of risk. Ta Ann Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  363.00  in Ta Ann Holdings on September 13, 2024 and sell it today you would earn a total of  68.00  from holding Ta Ann Holdings or generate 18.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

RHB Bank Bhd  vs.  Ta Ann Holdings

RHB Bank Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RHB Bank Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, RHB Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ta Ann Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ta Ann Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Ta Ann disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RHB Bank and Ta Ann

The main advantage of trading using opposite RHB Bank and Ta Ann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Ta Ann 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 Ta Ann will offset losses from the drop in Ta Ann's long position.

The idea behind RHB Bank Bhd and Ta Ann Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.