Correlation Between Bankinter and Bank Rakyat

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

By analyzing existing cross correlation between Bankinter SA ADR and Bank Rakyat, you can compare the effects of market volatilities on Bankinter and Bank Rakyat 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 Bankinter with a short position of Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Bank Rakyat.

Diversification Opportunities for Bankinter and Bank Rakyat

-0.68

Correlation Coefficient

Bankinter  Bank Rakyat

Excellent diversification

The 3 months correlation between Bankinter and Bank is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter SA ADR and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and Bankinter 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 Bankinter SA ADR are associated (or correlated) with Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of Bankinter i.e., Bankinter and Bank Rakyat go up and down completely randomly.

Pair Corralation between Bankinter and Bank Rakyat

Assuming the 90 days horizon Bankinter SA ADR is expected to generate 0.65 times more return on investment than Bank Rakyat. However, Bankinter SA ADR is 1.55 times less risky than Bank Rakyat. It trades about 0.29 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.01 per unit of risk. If you would invest  792.00  in Bankinter SA ADR on December 30, 2024 and sell it today you would earn a total of  342.00  from holding Bankinter SA ADR or generate 43.18% return on investment over 90 days.

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

Bankinter SA ADR  vs.  Bank Rakyat

Bankinter SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bankinter SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Bankinter showed solid returns over the last few months and may actually be approaching a breakup point.

Bank Rakyat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Bank Rakyat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bankinter and Bank Rakyat

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

The idea behind Bankinter SA ADR and Bank Rakyat 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.