Correlation Between BANK RAKYAT and CITIC

Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on BANK RAKYAT and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and CITIC.

Diversification Opportunities for BANK RAKYAT and CITIC

-0.54

Correlation Coefficient

BANK RAKYAT  CITIC

Excellent diversification

The 3 months correlation between BANK and CITIC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and CITIC go up and down completely randomly.

Pair Corralation between BANK RAKYAT and CITIC

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the CITIC. In addition to that, BANK RAKYAT is 1.08 times more volatile than CITIC LTD ADR5. It trades about -0.21 of its total potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.04 per unit of volatility. If you would invest  515.00  in CITIC LTD ADR5 on September 23, 2024 and sell it today you would earn a total of  5.00  from holding CITIC LTD ADR5 or generate 0.97% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  CITIC LTD ADR5

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CITIC LTD ADR5

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and CITIC

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

The idea behind BANK RAKYAT IND and CITIC LTD ADR5 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.