Correlation Between BANK RAKYAT and S A P

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

Diversification Opportunities for BANK RAKYAT and S A P

0.12

Correlation Coefficient

BANK RAKYAT  S A P

Average diversification

The 3 months correlation between BANK and SAP is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and S A P go up and down completely randomly.

Pair Corralation between BANK RAKYAT and S A P

Assuming the 90 days trading horizon BANK RAKYAT is expected to generate 1.34 times less return on investment than S A P. In addition to that, BANK RAKYAT is 3.36 times more volatile than SAP SE. It trades about 0.01 of its total potential returns per unit of risk. SAP SE is currently generating about 0.05 per unit of volatility. If you would invest  23,630  in SAP SE on December 29, 2024 and sell it today you would earn a total of  1,045  from holding SAP SE or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BANK RAKYAT IND  vs.  SAP SE

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.

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S A P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BANK RAKYAT and S A P

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

The idea behind BANK RAKYAT IND and SAP SE 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.