Correlation Between Bank Rakyat and Renault SA

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

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

Diversification Opportunities for Bank Rakyat and Renault SA

0.19

Correlation Coefficient

Bank Rakyat  Renault SA

Average diversification

The 3 months correlation between Bank and Renault is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Renault SA go up and down completely randomly.

Pair Corralation between Bank Rakyat and Renault SA

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Renault SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.91 times less risky than Renault SA. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Renault SA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,210  in Renault SA on September 30, 2024 and sell it today you would earn a total of  650.00  from holding Renault SA or generate 15.44% return on investment over 90 days.

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

Bank Rakyat  vs.  Renault SA

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 unsteady 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.

Renault SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renault SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Renault SA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Rakyat and Renault SA

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

The idea behind Bank Rakyat and Renault SA 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.