Correlation Between MF Bancorp and Bank Rakyat

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

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

Diversification Opportunities for MF Bancorp and Bank Rakyat

0.45

Correlation Coefficient

MF Bancorp  Bank Rakyat

Very weak diversification

The 3 months correlation between MFBP and Bank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and MF Bancorp 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 MF Bancorp 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 MF Bancorp i.e., MF Bancorp and Bank Rakyat go up and down completely randomly.

Pair Corralation between MF Bancorp and Bank Rakyat

Given the investment horizon of 90 days MF Bancorp is expected to generate 1.14 times more return on investment than Bank Rakyat. However, MF Bancorp is 1.14 times more volatile than Bank Rakyat. It trades about 0.01 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.01 per unit of risk. If you would invest  1,894  in MF Bancorp on December 19, 2024 and sell it today you would lose (44.00) from holding MF Bancorp or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

MF Bancorp  vs.  Bank Rakyat

MF Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days MF Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, MF Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

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 fairly strong forward-looking signals, Bank Rakyat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MF Bancorp and Bank Rakyat

The main advantage of trading using opposite MF Bancorp and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MF Bancorp 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 MF Bancorp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.