Correlation Between BANK RAKYAT and Aqua America

Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and Aqua America 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 Aqua America 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 Aqua America, you can compare the effects of market volatilities on BANK RAKYAT and Aqua America 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 Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Aqua America.

Diversification Opportunities for BANK RAKYAT and Aqua America

0.16

Correlation Coefficient

BANK RAKYAT  Aqua America

Average diversification

The 3 months correlation between BANK and Aqua is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Aqua America go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Aqua America

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 2.47 times more return on investment than Aqua America. However, BANK RAKYAT is 2.47 times more volatile than Aqua America. It trades about 0.01 of its potential returns per unit of risk. Aqua America is currently generating about -0.12 per unit of risk. If you would invest  23.00  in BANK RAKYAT IND on October 22, 2024 and sell it today you would earn a total of  0.00  from holding BANK RAKYAT IND or generate 0.0% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  Aqua America

BANK RAKYAT IND

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BANK RAKYAT and Aqua America

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

The idea behind BANK RAKYAT IND and Aqua America 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.