Correlation Between Bank Rakyat and Fks Multi

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

By analyzing existing cross correlation between Bank Rakyat Indonesia and Fks Multi Agro, you can compare the effects of market volatilities on Bank Rakyat and Fks Multi 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 Fks Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Fks Multi.

Diversification Opportunities for Bank Rakyat and Fks Multi

0.08

Correlation Coefficient

Bank Rakyat  Fks Multi

Significant diversification

The 3 months correlation between Bank and Fks is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Fks Multi Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fks Multi Agro 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 Indonesia are associated (or correlated) with Fks Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fks Multi Agro has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Fks Multi go up and down completely randomly.

Pair Corralation between Bank Rakyat and Fks Multi

Assuming the 90 days trading horizon Bank Rakyat is expected to generate 8.22 times less return on investment than Fks Multi. But when comparing it to its historical volatility, Bank Rakyat Indonesia is 1.12 times less risky than Fks Multi. It trades about 0.01 of its potential returns per unit of risk. Fks Multi Agro is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  575,426  in Fks Multi Agro on October 21, 2024 and sell it today you would earn a total of  459,574  from holding Fks Multi Agro or generate 79.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.58%
Values	Daily Returns

Bank Rakyat Indonesia  vs.  Fks Multi Agro

Bank Rakyat Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Rakyat Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Fks Multi Agro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank Rakyat and Fks Multi

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

The idea behind Bank Rakyat Indonesia and Fks Multi Agro 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.