Correlation Between BANK RAKYAT and Williams Companies

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

Diversification Opportunities for BANK RAKYAT and Williams Companies

-0.7

Correlation Coefficient

BANK RAKYAT  Williams Companies

Excellent diversification

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

Pair Corralation between BANK RAKYAT and Williams Companies

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Williams Companies. In addition to that, BANK RAKYAT is 1.49 times more volatile than The Williams Companies. It trades about -0.09 of its total potential returns per unit of risk. The Williams Companies is currently generating about 0.18 per unit of volatility. If you would invest  4,790  in The Williams Companies on October 23, 2024 and sell it today you would earn a total of  900.00  from holding The Williams Companies or generate 18.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

BANK RAKYAT IND  vs.  The Williams Companies

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 fragile 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.

The Williams Companies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Williams Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Williams Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and Williams Companies

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

The idea behind BANK RAKYAT IND and The Williams Companies 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.