Correlation Between Alliance Financial and RHB Bank

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

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

Diversification Opportunities for Alliance Financial and RHB Bank

0.15

Correlation Coefficient

Alliance Financial  RHB Bank

Average diversification

The 3 months correlation between Alliance and RHB is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Financial Group and RHB Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RHB Bank Bhd and Alliance Financial 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 Alliance Financial Group are associated (or correlated) with RHB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RHB Bank Bhd has no effect on the direction of Alliance Financial i.e., Alliance Financial and RHB Bank go up and down completely randomly.

Pair Corralation between Alliance Financial and RHB Bank

Assuming the 90 days trading horizon Alliance Financial Group is expected to under-perform the RHB Bank. In addition to that, Alliance Financial is 1.88 times more volatile than RHB Bank Bhd. It trades about -0.04 of its total potential returns per unit of risk. RHB Bank Bhd is currently generating about 0.17 per unit of volatility. If you would invest  617.00  in RHB Bank Bhd on December 25, 2024 and sell it today you would earn a total of  54.00  from holding RHB Bank Bhd or generate 8.75% return on investment over 90 days.

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

Alliance Financial Group  vs.  RHB Bank Bhd

Alliance Financial

Risk-Adjusted Performance

Modest

Over the last 90 days Alliance Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alliance Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 13 (%) 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 April 2025.

Pair Trading with Alliance Financial and RHB Bank

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

The idea behind Alliance Financial Group and RHB Bank 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.