Correlation Between Trend Micro and Bank Rakyat

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

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

Diversification Opportunities for Trend Micro and Bank Rakyat

0.14

Correlation Coefficient

Trend Micro  Bank Rakyat

Average diversification

The 3 months correlation between Trend and Bank is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trend Micro ADR and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and Trend Micro 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 Trend Micro ADR 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 Trend Micro i.e., Trend Micro and Bank Rakyat go up and down completely randomly.

Pair Corralation between Trend Micro and Bank Rakyat

Assuming the 90 days horizon Trend Micro ADR is expected to generate 0.93 times more return on investment than Bank Rakyat. However, Trend Micro ADR is 1.08 times less risky than Bank Rakyat. It trades about -0.26 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.25 per unit of risk. If you would invest  5,619  in Trend Micro ADR on October 8, 2024 and sell it today you would lose (420.00) from holding Trend Micro ADR or give up 7.47% of portfolio value over 90 days.

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

Trend Micro ADR  vs.  Bank Rakyat

Trend Micro ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trend Micro ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Trend Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank Rakyat

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Trend Micro and Bank Rakyat

The main advantage of trading using opposite Trend Micro and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trend Micro 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 Trend Micro ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.