Correlation Between BANK RAKYAT and Gap

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

Diversification Opportunities for BANK RAKYAT and Gap

-0.75

Correlation Coefficient

BANK RAKYAT  Gap

Pay attention - limited upside

The 3 months correlation between BANK and Gap is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Gap go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Gap

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 1.34 times more return on investment than Gap. However, BANK RAKYAT is 1.34 times more volatile than The Gap. It trades about -0.15 of its potential returns per unit of risk. The Gap is currently generating about -0.21 per unit of risk. If you would invest  24.00  in BANK RAKYAT IND on October 9, 2024 and sell it today you would lose (2.00) from holding BANK RAKYAT IND or give up 8.33% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  The Gap

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.

Gap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and Gap

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

The idea behind BANK RAKYAT IND and The Gap 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.