Correlation Between Bank Rakyat and BAB

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

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

Diversification Opportunities for Bank Rakyat and BAB

-0.64

Correlation Coefficient

Bank Rakyat  BAB

Excellent diversification

The 3 months correlation between Bank and BAB is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and BAB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAB Inc 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 BAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAB Inc has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and BAB go up and down completely randomly.

Pair Corralation between Bank Rakyat and BAB

Assuming the 90 days horizon Bank Rakyat is expected to generate 13.02 times less return on investment than BAB. But when comparing it to its historical volatility, Bank Rakyat is 2.5 times less risky than BAB. It trades about 0.01 of its potential returns per unit of risk. BAB Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  72.00  in BAB Inc on September 13, 2024 and sell it today you would earn a total of  12.00  from holding BAB Inc or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.7%
Values	Daily Returns

Bank Rakyat  vs.  BAB Inc

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.

BAB Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BAB Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, BAB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and BAB

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

The idea behind Bank Rakyat and BAB Inc 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .