Correlation Between Bank Rakyat and Ayala Corp

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

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

Diversification Opportunities for Bank Rakyat and Ayala Corp

0.59

Correlation Coefficient

Bank Rakyat  Ayala Corp

Very weak diversification

The 3 months correlation between Bank and Ayala is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR 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 Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp ADR has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Ayala Corp go up and down completely randomly.

Pair Corralation between Bank Rakyat and Ayala Corp

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Ayala Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.39 times less risky than Ayala Corp. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Ayala Corp ADR is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,170  in Ayala Corp ADR on December 1, 2024 and sell it today you would lose (210.00) from holding Ayala Corp ADR or give up 17.95% of portfolio value over 90 days.

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

Bank Rakyat  vs.  Ayala Corp ADR

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

Ayala Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank Rakyat and Ayala Corp

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

The idea behind Bank Rakyat and Ayala Corp ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.