Correlation Between Bank Rakyat and Bank Maybank

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

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

Diversification Opportunities for Bank Rakyat and Bank Maybank

0.23

Correlation Coefficient

Bank Rakyat  Bank Maybank

Modest diversification

The 3 months correlation between Bank and Bank is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Bank Maybank Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Maybank Indonesia and Bank Rakyat 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 Bank Rakyat Indonesia are associated (or correlated) with Bank Maybank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Maybank Indonesia has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Bank Maybank go up and down completely randomly.

Pair Corralation between Bank Rakyat and Bank Maybank

Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to generate 1.02 times more return on investment than Bank Maybank. However, Bank Rakyat is 1.02 times more volatile than Bank Maybank Indonesia. It trades about 0.04 of its potential returns per unit of risk. Bank Maybank Indonesia is currently generating about 0.0 per unit of risk. If you would invest  385,311  in Bank Rakyat Indonesia on February 1, 2024 and sell it today you would earn a total of  110,689  from holding Bank Rakyat Indonesia or generate 28.73% return on investment over 90 days.

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

Bank Rakyat Indonesia  vs.  Bank Maybank Indonesia

Bank Rakyat Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Rakyat Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bank Maybank Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Maybank Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bank Maybank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bank Rakyat and Bank Maybank

The main advantage of trading using opposite Bank Rakyat and Bank Maybank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, Bank Maybank 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 Maybank will offset losses from the drop in Bank Maybank's long position.

The idea behind Bank Rakyat Indonesia and Bank Maybank Indonesia 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.