Correlation Between Bank Rakyat and Caixabank

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

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

Diversification Opportunities for Bank Rakyat and Caixabank

-0.71

Correlation Coefficient

Bank Rakyat  Caixabank

Pay attention - limited upside

The 3 months correlation between Bank and Caixabank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Caixabank SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA 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 Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA ADR has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Caixabank go up and down completely randomly.

Pair Corralation between Bank Rakyat and Caixabank

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Caixabank. In addition to that, Bank Rakyat is 1.36 times more volatile than Caixabank SA ADR. It trades about -0.01 of its total potential returns per unit of risk. Caixabank SA ADR is currently generating about 0.27 per unit of volatility. If you would invest  179.00  in Caixabank SA ADR on December 30, 2024 and sell it today you would earn a total of  81.00  from holding Caixabank SA ADR or generate 45.25% return on investment over 90 days.

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

Bank Rakyat  vs.  Caixabank SA 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 fairly strong forward-looking signals, Bank Rakyat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Caixabank SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caixabank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and Caixabank

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

The idea behind Bank Rakyat and Caixabank SA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.