Correlation Between Bank Rakyat and Benchmark Bankshares

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

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

Diversification Opportunities for Bank Rakyat and Benchmark Bankshares

-0.93

Correlation Coefficient

Bank Rakyat  Benchmark Bankshares

Pay attention - limited upside

The 3 months correlation between Bank and Benchmark is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Benchmark Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Bankshares 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 Benchmark Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Bankshares has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Benchmark Bankshares go up and down completely randomly.

Pair Corralation between Bank Rakyat and Benchmark Bankshares

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Benchmark Bankshares. In addition to that, Bank Rakyat is 1.25 times more volatile than Benchmark Bankshares. It trades about -0.15 of its total potential returns per unit of risk. Benchmark Bankshares is currently generating about 0.24 per unit of volatility. If you would invest  2,135  in Benchmark Bankshares on October 7, 2024 and sell it today you would earn a total of  465.00  from holding Benchmark Bankshares or generate 21.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Bank Rakyat  vs.  Benchmark Bankshares

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 fragile 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.

Benchmark Bankshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Bankshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Benchmark Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and Benchmark Bankshares

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

The idea behind Bank Rakyat and Benchmark Bankshares 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.