Correlation Between BANK RAKYAT and Radian

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

Diversification Opportunities for BANK RAKYAT and Radian

0.61

Correlation Coefficient

BANK RAKYAT  Radian

Poor diversification

The 3 months correlation between BANK and Radian is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group 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 Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Radian go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Radian

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to generate 3.36 times more return on investment than Radian. However, BANK RAKYAT is 3.36 times more volatile than Radian Group. It trades about 0.01 of its potential returns per unit of risk. Radian Group is currently generating about 0.04 per unit of risk. If you would invest  22.00  in BANK RAKYAT IND on December 28, 2024 and sell it today you would lose (1.00) from holding BANK RAKYAT IND or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

BANK RAKYAT IND  vs.  Radian Group

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 rather sound technical and fundamental indicators, BANK RAKYAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Radian Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radian Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Radian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK RAKYAT and Radian

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

The idea behind BANK RAKYAT IND and Radian Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.