Correlation Between Bank Rakyat and East Africa

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

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

Diversification Opportunities for Bank Rakyat and East Africa

0.0

Correlation Coefficient

Bank Rakyat  East Africa

Pay attention - limited upside

The 3 months correlation between Bank and East is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals 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 East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and East Africa go up and down completely randomly.

Pair Corralation between Bank Rakyat and East Africa

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the East Africa. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 34.28 times less risky than East Africa. The pink sheet trades about -0.02 of its potential returns per unit of risk. The East Africa Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11.00  in East Africa Metals on December 2, 2024 and sell it today you would earn a total of  0.00  from holding East Africa Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

Bank Rakyat  vs.  East Africa Metals

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 weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

East Africa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Rakyat and East Africa

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

The idea behind Bank Rakyat and East Africa Metals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.