Correlation Between BANK RAKYAT and BNP Paribas

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

Diversification Opportunities for BANK RAKYAT and BNP Paribas

0.71

Correlation Coefficient

BANK RAKYAT  BNP Paribas

Poor diversification

The 3 months correlation between BANK and BNP is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA 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 BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas SA has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and BNP Paribas go up and down completely randomly.

Pair Corralation between BANK RAKYAT and BNP Paribas

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the BNP Paribas. In addition to that, BANK RAKYAT is 2.05 times more volatile than BNP Paribas SA. It trades about -0.14 of its total potential returns per unit of risk. BNP Paribas SA is currently generating about -0.04 per unit of volatility. If you would invest  5,827  in BNP Paribas SA on September 22, 2024 and sell it today you would lose (80.00) from holding BNP Paribas SA or give up 1.37% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  BNP Paribas SA

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

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BANK RAKYAT and BNP Paribas

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

The idea behind BANK RAKYAT IND and BNP Paribas SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.