Correlation Between BANK RAKYAT and CAIRN HOMES

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

Diversification Opportunities for BANK RAKYAT and CAIRN HOMES

-0.72

Correlation Coefficient

BANK RAKYAT  CAIRN HOMES

Pay attention - limited upside

The 3 months correlation between BANK and CAIRN is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and CAIRN HOMES go up and down completely randomly.

Pair Corralation between BANK RAKYAT and CAIRN HOMES

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the CAIRN HOMES. In addition to that, BANK RAKYAT is 1.12 times more volatile than CAIRN HOMES EO. It trades about -0.06 of its total potential returns per unit of risk. CAIRN HOMES EO is currently generating about 0.11 per unit of volatility. If you would invest  215.00  in CAIRN HOMES EO on October 6, 2024 and sell it today you would earn a total of  21.00  from holding CAIRN HOMES EO or generate 9.77% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  CAIRN HOMES EO

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.

CAIRN HOMES EO

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAIRN HOMES EO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAIRN HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and CAIRN HOMES

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

The idea behind BANK RAKYAT IND and CAIRN HOMES EO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.