Correlation Between Bank Rakyat and Knorr-Bremse Aktiengesellscha

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

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

Diversification Opportunities for Bank Rakyat and Knorr-Bremse Aktiengesellscha

-0.71

Correlation Coefficient

Bank Rakyat  Knorr-Bremse Aktiengesellscha

Pay attention - limited upside

The 3 months correlation between Bank and Knorr-Bremse is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Knorr Bremse Aktiengesellschaf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knorr-Bremse Aktiengesellscha has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Knorr-Bremse Aktiengesellscha go up and down completely randomly.

Pair Corralation between Bank Rakyat and Knorr-Bremse Aktiengesellscha

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Knorr-Bremse Aktiengesellscha. In addition to that, Bank Rakyat is 1.31 times more volatile than Knorr Bremse Aktiengesellschaft. It trades about -0.06 of its total potential returns per unit of risk. Knorr Bremse Aktiengesellschaft is currently generating about 0.21 per unit of volatility. If you would invest  1,805  in Knorr Bremse Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  587.00  from holding Knorr Bremse Aktiengesellschaft or generate 32.52% return on investment over 90 days.

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

Bank Rakyat  vs.  Knorr Bremse Aktiengesellschaf

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 latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Knorr-Bremse Aktiengesellscha

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knorr Bremse Aktiengesellschaft are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Knorr-Bremse Aktiengesellscha showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and Knorr-Bremse Aktiengesellscha

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

The idea behind Bank Rakyat and Knorr Bremse Aktiengesellschaft 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.