Correlation Between BANK RAKYAT and Electronic Arts

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

Diversification Opportunities for BANK RAKYAT and Electronic Arts

-0.11

Correlation Coefficient

BANK RAKYAT  Electronic Arts

Good diversification

The 3 months correlation between BANK and Electronic is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Electronic Arts go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Electronic Arts

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Electronic Arts. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 1.71 times less risky than Electronic Arts. The stock trades about -0.13 of its potential returns per unit of risk. The Electronic Arts is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14,116  in Electronic Arts on December 30, 2024 and sell it today you would lose (838.00) from holding Electronic Arts or give up 5.94% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  Electronic Arts

BANK RAKYAT IND

Risk-Adjusted Performance

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 uncertain 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.

Electronic Arts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Electronic Arts is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK RAKYAT and Electronic Arts

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

The idea behind BANK RAKYAT IND and Electronic Arts 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.