Correlation Between Bank Rakyat and Fentura Financial

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

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

Diversification Opportunities for Bank Rakyat and Fentura Financial

-0.29

Correlation Coefficient

Bank Rakyat  Fentura Financial

Very good diversification

The 3 months correlation between Bank and Fentura is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Fentura Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fentura Financial 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 Fentura Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fentura Financial has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Fentura Financial go up and down completely randomly.

Pair Corralation between Bank Rakyat and Fentura Financial

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Fentura Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.26 times less risky than Fentura Financial. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Fentura Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,334  in Fentura Financial on October 23, 2024 and sell it today you would earn a total of  2,036  from holding Fentura Financial or generate 87.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.36%
Values	Daily Returns

Bank Rakyat  vs.  Fentura Financial

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.

Fentura Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and Fentura Financial

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

The idea behind Bank Rakyat and Fentura Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.