Correlation Between Western Alliance and Bank Rakyat

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

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

Diversification Opportunities for Western Alliance and Bank Rakyat

-0.62

Correlation Coefficient

Western Alliance  Bank Rakyat

Excellent diversification

The 3 months correlation between Western and Bank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Alliance Bancorp. and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and Western Alliance 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 Western Alliance Bancorporation 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 Western Alliance i.e., Western Alliance and Bank Rakyat go up and down completely randomly.

Pair Corralation between Western Alliance and Bank Rakyat

Considering the 90-day investment horizon Western Alliance Bancorporation is expected to generate 3.05 times more return on investment than Bank Rakyat. However, Western Alliance is 3.05 times more volatile than Bank Rakyat. It trades about 0.05 of its potential returns per unit of risk. Bank Rakyat is currently generating about 0.01 per unit of risk. If you would invest  5,759  in Western Alliance Bancorporation on August 30, 2024 and sell it today you would earn a total of  3,591  from holding Western Alliance Bancorporation or generate 62.35% return on investment over 90 days.

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

Western Alliance Bancorp.  vs.  Bank Rakyat

Western Alliance Ban

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Alliance Bancorporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Western Alliance disclosed 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Western Alliance and Bank Rakyat

The main advantage of trading using opposite Western Alliance and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Alliance 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 Western Alliance Bancorporation 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.