Correlation Between BANK RAKYAT and Ares Management

Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and Ares Management 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 Ares Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BANK RAKYAT IND and Ares Management Corp, you can compare the effects of market volatilities on BANK RAKYAT and Ares Management 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 Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Ares Management.

Diversification Opportunities for BANK RAKYAT and Ares Management

0.81

Correlation Coefficient

BANK RAKYAT  Ares Management

Very poor diversification

The 3 months correlation between BANK and Ares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp 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 IND are associated (or correlated) with Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Ares Management go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Ares Management

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 2.17 times more return on investment than Ares Management. However, BANK RAKYAT is 2.17 times more volatile than Ares Management Corp. It trades about 0.01 of its potential returns per unit of risk. Ares Management Corp is currently generating about -0.1 per unit of risk. If you would invest  22.00  in BANK RAKYAT IND on December 28, 2024 and sell it today you would lose (1.00) from holding BANK RAKYAT IND or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

BANK RAKYAT IND  vs.  Ares Management Corp

BANK RAKYAT IND

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK RAKYAT IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BANK RAKYAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ares Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BANK RAKYAT and Ares Management

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

The idea behind BANK RAKYAT IND and Ares Management Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .