Correlation Between Bank Rakyat and Sensor Technologies

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

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

Diversification Opportunities for Bank Rakyat and Sensor Technologies

0.6

Correlation Coefficient

Bank Rakyat  Sensor Technologies

Poor diversification

The 3 months correlation between Bank and Sensor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Sensor Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensor Technologies Corp 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 Sensor Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensor Technologies Corp has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Sensor Technologies go up and down completely randomly.

Pair Corralation between Bank Rakyat and Sensor Technologies

Assuming the 90 days horizon Bank Rakyat is expected to generate 0.34 times more return on investment than Sensor Technologies. However, Bank Rakyat is 2.92 times less risky than Sensor Technologies. It trades about -0.05 of its potential returns per unit of risk. Sensor Technologies Corp is currently generating about -0.13 per unit of risk. If you would invest  1,259  in Bank Rakyat on December 21, 2024 and sell it today you would lose (153.00) from holding Bank Rakyat or give up 12.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Bank Rakyat  vs.  Sensor Technologies Corp

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.

Sensor Technologies Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensor Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Rakyat and Sensor Technologies

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

The idea behind Bank Rakyat and Sensor Technologies Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..