Correlation Between BOC Hong and Bank Rakyat

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

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

Diversification Opportunities for BOC Hong and Bank Rakyat

-0.48

Correlation Coefficient

BOC Hong  Bank Rakyat

Very good diversification

The 3 months correlation between BOC and Bank is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BOC Hong Kong and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and BOC Hong 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 BOC Hong Kong 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 BOC Hong i.e., BOC Hong and Bank Rakyat go up and down completely randomly.

Pair Corralation between BOC Hong and Bank Rakyat

Assuming the 90 days horizon BOC Hong Kong is expected to generate 1.15 times more return on investment than Bank Rakyat. However, BOC Hong is 1.15 times more volatile than Bank Rakyat. It trades about -0.23 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.37 per unit of risk. If you would invest  6,726  in BOC Hong Kong on September 4, 2024 and sell it today you would lose (570.00) from holding BOC Hong Kong or give up 8.47% of portfolio value over 90 days.

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

BOC Hong Kong  vs.  Bank Rakyat

BOC Hong Kong

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BOC Hong Kong are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, BOC Hong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BOC Hong and Bank Rakyat

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

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.