Correlation Between T M and Bank Rakyat

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

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

Diversification Opportunities for T M and Bank Rakyat

-0.18

Correlation Coefficient

T M  Bank Rakyat

Good diversification

The 3 months correlation between TMMI and Bank is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding T M M and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and T M 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 T M M 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 T M i.e., T M and Bank Rakyat go up and down completely randomly.

Pair Corralation between T M and Bank Rakyat

Given the investment horizon of 90 days T M M is expected to generate 10.91 times more return on investment than Bank Rakyat. However, T M is 10.91 times more volatile than Bank Rakyat. It trades about 0.42 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.05 per unit of risk. If you would invest  0.33  in T M M on October 22, 2024 and sell it today you would earn a total of  1.22  from holding T M M or generate 369.7% return on investment over 90 days.

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

T M M  vs.  Bank Rakyat

T M M

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T M M are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent primary indicators, T M demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 T M and Bank Rakyat

The main advantage of trading using opposite T M and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T M 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 T M M 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.