Correlation Between Guangdong Investment and BANK RAKYAT

Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and BANK RAKYAT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Investment Limited and BANK RAKYAT IND, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of BANK RAKYAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and BANK RAKYAT.

Diversification Opportunities for Guangdong Investment and BANK RAKYAT

-0.71

Correlation Coefficient

Guangdong Investment  BANK RAKYAT

Pay attention - limited upside

The 3 months correlation between Guangdong and BANK is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND and Guangdong Investment 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 Guangdong Investment Limited 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 IND has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and BANK RAKYAT go up and down completely randomly.

Pair Corralation between Guangdong Investment and BANK RAKYAT

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.6 times more return on investment than BANK RAKYAT. However, Guangdong Investment is 2.6 times more volatile than BANK RAKYAT IND. It trades about 0.07 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about 0.0 per unit of risk. If you would invest  16.00  in Guangdong Investment Limited on October 11, 2024 and sell it today you would earn a total of  56.00  from holding Guangdong Investment Limited or generate 350.0% return on investment over 90 days.

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

Guangdong Investment Limited  vs.  BANK RAKYAT IND

Guangdong Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Guangdong Investment and BANK RAKYAT

The main advantage of trading using opposite Guangdong Investment and BANK RAKYAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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 Guangdong Investment Limited and BANK RAKYAT IND 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.