Correlation Between Bank Rakyat and Wealth Minerals

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

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

Diversification Opportunities for Bank Rakyat and Wealth Minerals

0.9

Correlation Coefficient

Bank Rakyat  Wealth Minerals

Almost no diversification

The 3 months correlation between Bank and Wealth is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Wealth Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealth Minerals 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 Wealth Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealth Minerals has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Wealth Minerals go up and down completely randomly.

Pair Corralation between Bank Rakyat and Wealth Minerals

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Wealth Minerals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 9.03 times less risky than Wealth Minerals. The pink sheet trades about -0.31 of its potential returns per unit of risk. The Wealth Minerals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Wealth Minerals on October 10, 2024 and sell it today you would earn a total of  1.00  from holding Wealth Minerals or generate 33.33% return on investment over 90 days.

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

Bank Rakyat  vs.  Wealth Minerals

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.

Wealth Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank Rakyat and Wealth Minerals

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

The idea behind Bank Rakyat and Wealth Minerals 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.