Correlation Between Bank Rakyat and Micropac Industries

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

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

Diversification Opportunities for Bank Rakyat and Micropac Industries

-0.91

Correlation Coefficient

Bank Rakyat  Micropac Industries

Pay attention - limited upside

The 3 months correlation between Bank and Micropac is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Micropac Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micropac Industries 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 Micropac Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micropac Industries has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Micropac Industries go up and down completely randomly.

Pair Corralation between Bank Rakyat and Micropac Industries

Assuming the 90 days horizon Bank Rakyat is expected to generate 13.39 times less return on investment than Micropac Industries. But when comparing it to its historical volatility, Bank Rakyat is 1.83 times less risky than Micropac Industries. It trades about 0.01 of its potential returns per unit of risk. Micropac Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Micropac Industries on September 2, 2024 and sell it today you would earn a total of  531.00  from holding Micropac Industries or generate 36.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	84.07%
Values	Daily Returns

Bank Rakyat  vs.  Micropac Industries

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Micropac Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micropac Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Micropac Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and Micropac Industries

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

The idea behind Bank Rakyat and Micropac Industries 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.