Correlation Between BANK RAKYAT and MULTI CHEM

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

Diversification Opportunities for BANK RAKYAT and MULTI CHEM

-0.39

Correlation Coefficient

BANK RAKYAT  MULTI CHEM

Very good diversification

The 3 months correlation between BANK and MULTI is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and MULTI CHEM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI CHEM LTD 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 MULTI CHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI CHEM LTD has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and MULTI CHEM go up and down completely randomly.

Pair Corralation between BANK RAKYAT and MULTI CHEM

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the MULTI CHEM. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.04 times less risky than MULTI CHEM. The stock trades about -0.14 of its potential returns per unit of risk. The MULTI CHEM LTD is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  196.00  in MULTI CHEM LTD on September 23, 2024 and sell it today you would lose (10.00) from holding MULTI CHEM LTD or give up 5.1% 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.  MULTI CHEM LTD

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

MULTI CHEM LTD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MULTI CHEM 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 MULTI CHEM

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

The idea behind BANK RAKYAT IND and MULTI CHEM LTD 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.