Correlation Between Bank Rakyat and Axcella Health

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

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

Diversification Opportunities for Bank Rakyat and Axcella Health

0.89

Correlation Coefficient

Bank Rakyat  Axcella Health

Very poor diversification

The 3 months correlation between Bank and Axcella is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Axcella Health go up and down completely randomly.

Pair Corralation between Bank Rakyat and Axcella Health

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Axcella Health. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 10.1 times less risky than Axcella Health. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Axcella Health is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Axcella Health on September 4, 2024 and sell it today you would lose (69.00) from holding Axcella Health or give up 77.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	30.71%
Values	Daily Returns

Bank Rakyat  vs.  Axcella Health

Bank Rakyat

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Axcella Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Axcella Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Rakyat and Axcella Health

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

The idea behind Bank Rakyat and Axcella Health 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.