Correlation Between Bank Rakyat and China Gold

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

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

Diversification Opportunities for Bank Rakyat and China Gold

-0.44

Correlation Coefficient

Bank Rakyat  China Gold

Very good diversification

The 3 months correlation between Bank and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and China Gold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gold International 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 China Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gold International has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and China Gold go up and down completely randomly.

Pair Corralation between Bank Rakyat and China Gold

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the China Gold. In addition to that, Bank Rakyat is 1.11 times more volatile than China Gold International. It trades about -0.01 of its total potential returns per unit of risk. China Gold International is currently generating about 0.2 per unit of volatility. If you would invest  480.00  in China Gold International on December 28, 2024 and sell it today you would earn a total of  190.00  from holding China Gold International or generate 39.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Bank Rakyat  vs.  China Gold International

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.

China Gold International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, China Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and China Gold

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

The idea behind Bank Rakyat and China Gold International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.