Correlation Between Bank Rakyat and Penn National

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

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

Diversification Opportunities for Bank Rakyat and Penn National

-0.61

Correlation Coefficient

Bank Rakyat  Penn National

Excellent diversification

The 3 months correlation between Bank and Penn is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Penn National go up and down completely randomly.

Pair Corralation between Bank Rakyat and Penn National

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Penn National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.48 times less risky than Penn National. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Penn National Gaming is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,824  in Penn National Gaming on September 1, 2024 and sell it today you would earn a total of  335.00  from holding Penn National Gaming or generate 18.37% 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.  Penn National Gaming

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Penn National Gaming

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Bank Rakyat and Penn National

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

The idea behind Bank Rakyat and Penn National Gaming 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..