Correlation Between BANK RAKYAT and Xcel Energy

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

Diversification Opportunities for BANK RAKYAT and Xcel Energy

-0.24

Correlation Coefficient

BANK RAKYAT  Xcel Energy

Very good diversification

The 3 months correlation between BANK and Xcel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy 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 Xcel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Energy has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Xcel Energy go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Xcel Energy

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Xcel Energy. In addition to that, BANK RAKYAT is 3.66 times more volatile than Xcel Energy. It trades about -0.02 of its total potential returns per unit of risk. Xcel Energy is currently generating about -0.01 per unit of volatility. If you would invest  6,471  in Xcel Energy on December 25, 2024 and sell it today you would lose (81.00) from holding Xcel Energy or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

BANK RAKYAT IND  vs.  Xcel Energy

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 unsteady 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.

Xcel Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xcel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xcel Energy 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 Xcel Energy

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

The idea behind BANK RAKYAT IND and Xcel Energy 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.