Correlation Between BANK RAKYAT and FORTEC ELEKTRONIK

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

Diversification Opportunities for BANK RAKYAT and FORTEC ELEKTRONIK

-0.29

Correlation Coefficient

BANK RAKYAT  FORTEC ELEKTRONIK

Very good diversification

The 3 months correlation between BANK and FORTEC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and FORTEC ELEKTRONIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTEC ELEKTRONIK has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and FORTEC ELEKTRONIK go up and down completely randomly.

Pair Corralation between BANK RAKYAT and FORTEC ELEKTRONIK

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the FORTEC ELEKTRONIK. In addition to that, BANK RAKYAT is 1.35 times more volatile than FORTEC ELEKTRONIK. It trades about -0.1 of its total potential returns per unit of risk. FORTEC ELEKTRONIK is currently generating about -0.05 per unit of volatility. If you would invest  1,980  in FORTEC ELEKTRONIK on October 8, 2024 and sell it today you would lose (30.00) from holding FORTEC ELEKTRONIK or give up 1.52% 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.  FORTEC ELEKTRONIK

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

FORTEC ELEKTRONIK

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BANK RAKYAT and FORTEC ELEKTRONIK

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

The idea behind BANK RAKYAT IND and FORTEC ELEKTRONIK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.