Correlation Between Bank Rakyat and Sovos Brands

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

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

Diversification Opportunities for Bank Rakyat and Sovos Brands

-0.68

Correlation Coefficient

Bank Rakyat  Sovos Brands

Excellent diversification

The 3 months correlation between Bank and Sovos is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Sovos Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovos Brands 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 Sovos Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovos Brands has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Sovos Brands go up and down completely randomly.

Pair Corralation between Bank Rakyat and Sovos Brands

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Sovos Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.08 times less risky than Sovos Brands. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Sovos Brands is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,465  in Sovos Brands on October 5, 2024 and sell it today you would earn a total of  397.00  from holding Sovos Brands or generate 27.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.04%
Values	Daily Returns

Bank Rakyat  vs.  Sovos Brands

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

Sovos Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sovos Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sovos Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank Rakyat and Sovos Brands

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

The idea behind Bank Rakyat and Sovos Brands 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.