Correlation Between BANK RAKYAT and Assured Guaranty

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

Diversification Opportunities for BANK RAKYAT and Assured Guaranty

-0.03

Correlation Coefficient

BANK RAKYAT  Assured Guaranty

Good diversification

The 3 months correlation between BANK and Assured is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty 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 Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Assured Guaranty go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Assured Guaranty

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Assured Guaranty. In addition to that, BANK RAKYAT is 1.7 times more volatile than Assured Guaranty. It trades about -0.05 of its total potential returns per unit of risk. Assured Guaranty is currently generating about 0.01 per unit of volatility. If you would invest  8,650  in Assured Guaranty on December 5, 2024 and sell it today you would lose (100.00) from holding Assured Guaranty or give up 1.16% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  Assured Guaranty

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

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Assured Guaranty 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 Assured Guaranty

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

The idea behind BANK RAKYAT IND and Assured Guaranty 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.