Correlation Between BANK RAKYAT and Great-West Lifeco

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

Diversification Opportunities for BANK RAKYAT and Great-West Lifeco

-0.57

Correlation Coefficient

BANK RAKYAT  Great-West Lifeco

Excellent diversification

The 3 months correlation between BANK and Great-West is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great-West Lifeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Great-West Lifeco go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Great-West Lifeco

Assuming the 90 days trading horizon BANK RAKYAT is expected to generate 28.38 times less return on investment than Great-West Lifeco. In addition to that, BANK RAKYAT is 2.5 times more volatile than Great West Lifeco. It trades about 0.0 of its total potential returns per unit of risk. Great West Lifeco is currently generating about 0.09 per unit of volatility. If you would invest  2,009  in Great West Lifeco on October 10, 2024 and sell it today you would earn a total of  1,151  from holding Great West Lifeco or generate 57.29% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  Great West Lifeco

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.

Great West Lifeco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Great-West Lifeco 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 Great-West Lifeco

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

The idea behind BANK RAKYAT IND and Great West Lifeco 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.