Correlation Between RHB Bank and Mycron Steel

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

Diversification Opportunities for RHB Bank and Mycron Steel

-0.78

Correlation Coefficient

RHB Bank  Mycron Steel

Pay attention - limited upside

The 3 months correlation between RHB and Mycron is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Mycron Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mycron Steel Bhd 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 Mycron Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mycron Steel Bhd has no effect on the direction of RHB Bank i.e., RHB Bank and Mycron Steel go up and down completely randomly.

Pair Corralation between RHB Bank and Mycron Steel

Assuming the 90 days trading horizon RHB Bank Bhd is expected to generate 0.13 times more return on investment than Mycron Steel. However, RHB Bank Bhd is 7.81 times less risky than Mycron Steel. It trades about 0.19 of its potential returns per unit of risk. Mycron Steel Bhd is currently generating about -0.02 per unit of risk. If you would invest  620.00  in RHB Bank Bhd on December 30, 2024 and sell it today you would earn a total of  64.00  from holding RHB Bank Bhd or generate 10.32% return on investment over 90 days.

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

RHB Bank Bhd  vs.  Mycron Steel Bhd

RHB Bank Bhd

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RHB Bank Bhd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, RHB Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mycron Steel Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mycron Steel Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with RHB Bank and Mycron Steel

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

The idea behind RHB Bank Bhd and Mycron Steel Bhd 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.