Correlation Between Bank Rakyat and Universal Power

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

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

Diversification Opportunities for Bank Rakyat and Universal Power

0.57

Correlation Coefficient

Bank Rakyat  Universal Power

Very weak diversification

The 3 months correlation between Bank and Universal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Universal Power Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Power Industry 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 Universal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Power Industry has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Universal Power go up and down completely randomly.

Pair Corralation between Bank Rakyat and Universal Power

Assuming the 90 days horizon Bank Rakyat is expected to generate 0.44 times more return on investment than Universal Power. However, Bank Rakyat is 2.3 times less risky than Universal Power. It trades about -0.01 of its potential returns per unit of risk. Universal Power Industry is currently generating about -0.13 per unit of risk. If you would invest  1,264  in Bank Rakyat on December 29, 2024 and sell it today you would lose (52.00) from holding Bank Rakyat or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Bank Rakyat  vs.  Universal Power Industry

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 fairly strong forward-looking signals, Bank Rakyat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Power Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Power Industry 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 indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bank Rakyat and Universal Power

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

The idea behind Bank Rakyat and Universal Power Industry 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.