Correlation Between Bank Rakyat and Cibl

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

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

Diversification Opportunities for Bank Rakyat and Cibl

0.03

Correlation Coefficient

Bank Rakyat  Cibl

Significant diversification

The 3 months correlation between Bank and Cibl is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Cibl Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cibl 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 Cibl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cibl Inc has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Cibl go up and down completely randomly.

Pair Corralation between Bank Rakyat and Cibl

Assuming the 90 days horizon Bank Rakyat is expected to generate 1.58 times more return on investment than Cibl. However, Bank Rakyat is 1.58 times more volatile than Cibl Inc. It trades about -0.02 of its potential returns per unit of risk. Cibl Inc is currently generating about -0.04 per unit of risk. If you would invest  1,222  in Bank Rakyat on December 27, 2024 and sell it today you would lose (88.00) from holding Bank Rakyat or give up 7.2% of portfolio value over 90 days.

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

Bank Rakyat  vs.  Cibl Inc

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.

Cibl Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cibl Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Cibl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank Rakyat and Cibl

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

The idea behind Bank Rakyat and Cibl 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.