Correlation Between Central Pacific and Bank Rakyat

Can any of the company-specific risk be diversified away by investing in both Central Pacific and Bank Rakyat 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 Central Pacific and Bank Rakyat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Pacific Financial and Bank Rakyat, you can compare the effects of market volatilities on Central Pacific and Bank Rakyat 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 Central Pacific with a short position of Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Pacific and Bank Rakyat.

Diversification Opportunities for Central Pacific and Bank Rakyat

0.59

Correlation Coefficient

Central Pacific  Bank Rakyat

Very weak diversification

The 3 months correlation between Central and Bank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and Central Pacific 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 Central Pacific Financial are associated (or correlated) with Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of Central Pacific i.e., Central Pacific and Bank Rakyat go up and down completely randomly.

Pair Corralation between Central Pacific and Bank Rakyat

Considering the 90-day investment horizon Central Pacific Financial is expected to generate 0.8 times more return on investment than Bank Rakyat. However, Central Pacific Financial is 1.24 times less risky than Bank Rakyat. It trades about -0.05 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.14 per unit of risk. If you would invest  3,112  in Central Pacific Financial on December 2, 2024 and sell it today you would lose (208.00) from holding Central Pacific Financial or give up 6.68% of portfolio value over 90 days.

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

Central Pacific Financial  vs.  Bank Rakyat

Central Pacific Financial

Risk-Adjusted Performance

Very Weak

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

Bank Rakyat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Central Pacific and Bank Rakyat

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

The idea behind Central Pacific Financial and Bank Rakyat 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 Anywhere module to track or share privately all of your investments from the convenience of any device.