Correlation Between BANK RAKYAT and Sumitomo Mitsui

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

Diversification Opportunities for BANK RAKYAT and Sumitomo Mitsui

-0.83

Correlation Coefficient

BANK RAKYAT  Sumitomo Mitsui

Pay attention - limited upside

The 3 months correlation between BANK and Sumitomo is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Sumitomo Mitsui

Assuming the 90 days trading horizon BANK RAKYAT is expected to generate 7.47 times less return on investment than Sumitomo Mitsui. In addition to that, BANK RAKYAT is 1.55 times more volatile than Sumitomo Mitsui Financial. It trades about 0.01 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.15 per unit of volatility. If you would invest  2,228  in Sumitomo Mitsui Financial on October 22, 2024 and sell it today you would earn a total of  98.00  from holding Sumitomo Mitsui Financial or generate 4.4% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  Sumitomo Mitsui Financial

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.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with BANK RAKYAT and Sumitomo Mitsui

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

The idea behind BANK RAKYAT IND and Sumitomo Mitsui Financial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.