Correlation Between RHB Bank and Public Bank

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

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

Diversification Opportunities for RHB Bank and Public Bank

-0.57

Correlation Coefficient

RHB Bank  Public Bank

Excellent diversification

The 3 months correlation between RHB and Public is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Public Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Bank Bhd and RHB Bank 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 RHB Bank Bhd are associated (or correlated) with Public Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Bank Bhd has no effect on the direction of RHB Bank i.e., RHB Bank and Public Bank go up and down completely randomly.

Pair Corralation between RHB Bank and Public Bank

Assuming the 90 days trading horizon RHB Bank Bhd is expected to generate 0.79 times more return on investment than Public Bank. However, RHB Bank Bhd is 1.27 times less risky than Public Bank. It trades about 0.11 of its potential returns per unit of risk. Public Bank Bhd is currently generating about -0.03 per unit of risk. If you would invest  615.00  in RHB Bank Bhd on September 13, 2024 and sell it today you would earn a total of  41.00  from holding RHB Bank Bhd or generate 6.67% return on investment over 90 days.

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

RHB Bank Bhd  vs.  Public Bank Bhd

RHB Bank Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RHB Bank Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, RHB Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Bank Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Public Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RHB Bank and Public Bank

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

The idea behind RHB Bank Bhd and Public Bank Bhd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.