Correlation Between Bank Rakyat and Equitable

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

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

Diversification Opportunities for Bank Rakyat and Equitable

0.69

Correlation Coefficient

Bank Rakyat  Equitable

Poor diversification

The 3 months correlation between Bank and Equitable is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Equitable Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Group 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 Equitable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Group has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Equitable go up and down completely randomly.

Pair Corralation between Bank Rakyat and Equitable

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Equitable. In addition to that, Bank Rakyat is 1.13 times more volatile than Equitable Group. It trades about -0.1 of its total potential returns per unit of risk. Equitable Group is currently generating about -0.02 per unit of volatility. If you would invest  7,700  in Equitable Group on October 26, 2024 and sell it today you would lose (218.00) from holding Equitable Group or give up 2.83% of portfolio value over 90 days.

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

Bank Rakyat  vs.  Equitable Group

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 weak 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.

Equitable Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitable Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Equitable 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 Equitable

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

The idea behind Bank Rakyat and Equitable Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.