Correlation Between BANK RAKYAT and Targa Resources

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

Diversification Opportunities for BANK RAKYAT and Targa Resources

-0.7

Correlation Coefficient

BANK RAKYAT  Targa Resources

Excellent diversification

The 3 months correlation between BANK and Targa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Targa Resources go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Targa Resources

Assuming the 90 days trading horizon BANK RAKYAT is expected to generate 10.62 times less return on investment than Targa Resources. In addition to that, BANK RAKYAT is 1.65 times more volatile than Targa Resources Corp. It trades about 0.01 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.13 per unit of volatility. If you would invest  6,564  in Targa Resources Corp on October 4, 2024 and sell it today you would earn a total of  11,201  from holding Targa Resources Corp or generate 170.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BANK RAKYAT IND  vs.  Targa Resources Corp

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 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Targa Resources Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and Targa Resources

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

The idea behind BANK RAKYAT IND and Targa Resources Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.