Correlation Between BANK RAKYAT and Heidelberg Materials

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

Diversification Opportunities for BANK RAKYAT and Heidelberg Materials

-0.85

Correlation Coefficient

BANK RAKYAT  Heidelberg Materials

Pay attention - limited upside

The 3 months correlation between BANK and Heidelberg is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Heidelberg Materials go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Heidelberg Materials

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Heidelberg Materials. In addition to that, BANK RAKYAT is 1.6 times more volatile than Heidelberg Materials AG. It trades about -0.09 of its total potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.29 per unit of volatility. If you would invest  9,842  in Heidelberg Materials AG on October 23, 2024 and sell it today you would earn a total of  3,118  from holding Heidelberg Materials AG or generate 31.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

BANK RAKYAT IND  vs.  Heidelberg Materials AG

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.

Heidelberg Materials

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Heidelberg Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and Heidelberg Materials

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

The idea behind BANK RAKYAT IND and Heidelberg Materials AG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.