Correlation Between Bank Rakyat and BlackRock Investment

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

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

Diversification Opportunities for Bank Rakyat and BlackRock Investment

0.88

Correlation Coefficient

Bank Rakyat  BlackRock Investment

Very poor diversification

The 3 months correlation between Bank and BlackRock is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and BlackRock Investment Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Investment 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 BlackRock Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Investment has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and BlackRock Investment go up and down completely randomly.

Pair Corralation between Bank Rakyat and BlackRock Investment

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the BlackRock Investment. In addition to that, Bank Rakyat is 2.29 times more volatile than BlackRock Investment Quality. It trades about -0.07 of its total potential returns per unit of risk. BlackRock Investment Quality is currently generating about -0.03 per unit of volatility. If you would invest  1,161  in BlackRock Investment Quality on October 4, 2024 and sell it today you would lose (35.00) from holding BlackRock Investment Quality or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Bank Rakyat  vs.  BlackRock Investment Quality

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BlackRock Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Investment Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bank Rakyat and BlackRock Investment

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

The idea behind Bank Rakyat and BlackRock Investment Quality 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.