Correlation Between Bank Rakyat and Boralex

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

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

Diversification Opportunities for Bank Rakyat and Boralex

0.91

Correlation Coefficient

Bank Rakyat  Boralex

Almost no diversification

The 3 months correlation between Bank and Boralex is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Boralex go up and down completely randomly.

Pair Corralation between Bank Rakyat and Boralex

Assuming the 90 days horizon Bank Rakyat is expected to generate 0.58 times more return on investment than Boralex. However, Bank Rakyat is 1.74 times less risky than Boralex. It trades about 0.0 of its potential returns per unit of risk. Boralex is currently generating about -0.02 per unit of risk. If you would invest  1,364  in Bank Rakyat on October 7, 2024 and sell it today you would lose (83.00) from holding Bank Rakyat or give up 6.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	77.82%
Values	Daily Returns

Bank Rakyat  vs.  Boralex

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.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Rakyat and Boralex

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

The idea behind Bank Rakyat and Boralex 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.