Correlation Between BANK RAKYAT and CN DATANG

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

Diversification Opportunities for BANK RAKYAT and CN DATANG

-0.72

Correlation Coefficient

BANK RAKYAT  CN DATANG

Pay attention - limited upside

The 3 months correlation between BANK and DT7 is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and CN DATANG C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN DATANG C 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 CN DATANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN DATANG C has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and CN DATANG go up and down completely randomly.

Pair Corralation between BANK RAKYAT and CN DATANG

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the CN DATANG. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.44 times less risky than CN DATANG. The stock trades about -0.06 of its potential returns per unit of risk. The CN DATANG C is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  25.00  in CN DATANG C on October 6, 2024 and sell it today you would lose (1.00) from holding CN DATANG C or give up 4.0% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  CN DATANG C

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CN DATANG C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CN DATANG C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CN DATANG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BANK RAKYAT and CN DATANG

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

The idea behind BANK RAKYAT IND and CN DATANG C 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.