Correlation Between BANK RAKYAT and Loews Corp

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

Diversification Opportunities for BANK RAKYAT and Loews Corp

0.31

Correlation Coefficient

BANK RAKYAT  Loews Corp

Weak diversification

The 3 months correlation between BANK and Loews is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Loews Corp go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Loews Corp

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Loews Corp. In addition to that, BANK RAKYAT is 4.08 times more volatile than Loews Corp. It trades about -0.04 of its total potential returns per unit of risk. Loews Corp is currently generating about 0.02 per unit of volatility. If you would invest  7,844  in Loews Corp on December 20, 2024 and sell it today you would earn a total of  56.00  from holding Loews Corp or generate 0.71% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  Loews Corp

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 latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Loews Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Loews Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BANK RAKYAT and Loews Corp

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

The idea behind BANK RAKYAT IND and Loews Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.