Correlation Between BANK RAKYAT and United Overseas

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

Diversification Opportunities for BANK RAKYAT and United Overseas

-0.84

Correlation Coefficient

BANK RAKYAT  United Overseas

Pay attention - limited upside

The 3 months correlation between BANK and United is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and United Overseas go up and down completely randomly.

Pair Corralation between BANK RAKYAT and United Overseas

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the United Overseas. In addition to that, BANK RAKYAT is 3.51 times more volatile than United Overseas Bank. It trades about -0.07 of its total potential returns per unit of risk. United Overseas Bank is currently generating about -0.17 per unit of volatility. If you would invest  2,620  in United Overseas Bank on October 5, 2024 and sell it today you would lose (67.00) from holding United Overseas Bank or give up 2.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

BANK RAKYAT IND  vs.  United Overseas Bank

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.

United Overseas Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and United Overseas

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

The idea behind BANK RAKYAT IND and United Overseas Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.