Correlation Between RHB Bank and Heineken Bhd
Can any of the company-specific risk be diversified away by investing in both RHB Bank and Heineken Bhd 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 Heineken Bhd 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 Heineken Bhd, you can compare the effects of market volatilities on RHB Bank and Heineken Bhd 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 Heineken Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of RHB Bank and Heineken Bhd.
Diversification Opportunities for RHB Bank and Heineken Bhd
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RHB and Heineken is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding RHB Bank Bhd and Heineken Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken 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 Heineken Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Bhd has no effect on the direction of RHB Bank i.e., RHB Bank and Heineken Bhd go up and down completely randomly.
Pair Corralation between RHB Bank and Heineken Bhd
Assuming the 90 days trading horizon RHB Bank is expected to generate 2.06 times less return on investment than Heineken Bhd. But when comparing it to its historical volatility, RHB Bank Bhd is 1.36 times less risky than Heineken Bhd. It trades about 0.05 of its potential returns per unit of risk. Heineken Bhd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,255 in Heineken Bhd on September 25, 2024 and sell it today you would earn a total of 139.00 from holding Heineken Bhd or generate 6.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
RHB Bank Bhd vs. Heineken Bhd
Performance |
Timeline |
RHB Bank Bhd |
Heineken Bhd |
RHB Bank and Heineken Bhd Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RHB Bank and Heineken Bhd
The main advantage of trading using opposite RHB Bank and Heineken Bhd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RHB Bank position performs unexpectedly, Heineken Bhd 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 Heineken Bhd will offset losses from the drop in Heineken Bhd's long position.RHB Bank vs. Malayan Banking Bhd | RHB Bank vs. Public Bank Bhd | RHB Bank vs. Hong Leong Bank | RHB Bank vs. Genetec Technology Bhd |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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