Correlation Between CARSALES and BANK RAKYAT

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

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

Diversification Opportunities for CARSALES and BANK RAKYAT

0.78

Correlation Coefficient

CARSALES  BANK RAKYAT

Poor diversification

The 3 months correlation between CARSALES and BANK is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM 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 CARSALES 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 CARSALESCOM 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 CARSALES i.e., CARSALES and BANK RAKYAT go up and down completely randomly.

Pair Corralation between CARSALES and BANK RAKYAT

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.34 times more return on investment than BANK RAKYAT. However, CARSALESCOM is 2.98 times less risky than BANK RAKYAT. It trades about -0.13 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about -0.05 per unit of risk. If you would invest  2,214  in CARSALESCOM on December 23, 2024 and sell it today you would lose (304.00) from holding CARSALESCOM or give up 13.73% of portfolio value over 90 days.

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

CARSALESCOM  vs.  BANK RAKYAT IND

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BANK RAKYAT IND

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CARSALES and BANK RAKYAT

The main advantage of trading using opposite CARSALES and BANK RAKYAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALES 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 CARSALESCOM 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.