Correlation Between BANK RAKYAT and Bank of America Corp

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

Diversification Opportunities for BANK RAKYAT and Bank of America Corp

0.03

Correlation Coefficient

BANK RAKYAT  Bank of America Corp

Significant diversification

The 3 months correlation between BANK and Bank is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America Corp has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Bank of America Corp go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Bank of America Corp

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 2.89 times more return on investment than Bank of America Corp. However, BANK RAKYAT is 2.89 times more volatile than Bank of America. It trades about 0.06 of its potential returns per unit of risk. Bank of America is currently generating about -0.19 per unit of risk. If you would invest  22.00  in BANK RAKYAT IND on December 4, 2024 and sell it today you would earn a total of  1.00  from holding BANK RAKYAT IND or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BANK RAKYAT IND  vs.  Bank of America

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

Bank of America Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BANK RAKYAT and Bank of America Corp

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

The idea behind BANK RAKYAT IND and Bank of America 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.