Correlation Between BANK RAKYAT and Lenovo Group

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

Diversification Opportunities for BANK RAKYAT and Lenovo Group

0.41

Correlation Coefficient

BANK RAKYAT  Lenovo Group

Very weak diversification

The 3 months correlation between BANK and Lenovo is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Lenovo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group Limited 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 Lenovo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenovo Group Limited has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Lenovo Group go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Lenovo Group

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Lenovo Group. But the stock apears to be less risky and, when comparing its historical volatility, BANK RAKYAT IND is 2.39 times less risky than Lenovo Group. The stock trades about -0.18 of its potential returns per unit of risk. The Lenovo Group Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,534  in Lenovo Group Limited on October 4, 2024 and sell it today you would lose (74.00) from holding Lenovo Group Limited or give up 2.92% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  Lenovo Group Limited

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 uncertain 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.

Lenovo Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lenovo Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lenovo Group 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 Lenovo Group

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

The idea behind BANK RAKYAT IND and Lenovo Group Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.