Correlation Between Bank Rakyat and Bank of AmericaPFD SER B

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

By analyzing existing cross correlation between Bank Rakyat and Bank of America, you can compare the effects of market volatilities on Bank Rakyat and Bank of AmericaPFD SER B 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 of AmericaPFD SER B . Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Bank of AmericaPFD SER B .

Diversification Opportunities for Bank Rakyat and Bank of AmericaPFD SER B

-0.59

Correlation Coefficient

Bank Rakyat  Bank of AmericaPFD SER B

Excellent diversification

The 3 months correlation between Bank and Bank is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of AmericaPFD SER B 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 are associated (or correlated) with Bank of AmericaPFD SER B . Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of AmericaPFD SER B has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Bank of AmericaPFD SER B go up and down completely randomly.

Pair Corralation between Bank Rakyat and Bank of AmericaPFD SER B

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the Bank of AmericaPFD SER B . But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.5 times less risky than Bank of AmericaPFD SER B . The pink sheet trades about -0.17 of its potential returns per unit of risk. The Bank of America is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  18,816  in Bank of America on September 3, 2024 and sell it today you would earn a total of  184.00  from holding Bank of America or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Bank Rakyat  vs.  Bank of America

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.

Bank of AmericaPFD SER B

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Bank of AmericaPFD SER B is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Rakyat and Bank of AmericaPFD SER B

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

The idea behind Bank Rakyat and Bank of America 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.