Correlation Between Bank Rakyat and Amada

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

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

Diversification Opportunities for Bank Rakyat and Amada

-0.29

Correlation Coefficient

Bank Rakyat  Amada

Very good diversification

The 3 months correlation between Bank and Amada is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada 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 are associated (or correlated) with Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Amada go up and down completely randomly.

Pair Corralation between Bank Rakyat and Amada

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Amada. In addition to that, Bank Rakyat is 12.44 times more volatile than Amada Co. It trades about -0.01 of its total potential returns per unit of risk. Amada Co is currently generating about 0.13 per unit of volatility. If you would invest  946.00  in Amada Co on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Amada Co or generate 2.01% return on investment over 90 days.

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

Bank Rakyat  vs.  Amada Co

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.

Amada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Amada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Rakyat and Amada

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

The idea behind Bank Rakyat and Amada Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.