Correlation Between Bank Rakyat and CF Acquisition

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

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

Diversification Opportunities for Bank Rakyat and CF Acquisition

-0.84

Correlation Coefficient

Bank Rakyat  CF Acquisition

Pay attention - limited upside

The 3 months correlation between Bank and CFIV is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and CF Acquisition IV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition IV 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition IV has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and CF Acquisition go up and down completely randomly.

Pair Corralation between Bank Rakyat and CF Acquisition

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the CF Acquisition. In addition to that, Bank Rakyat is 8.53 times more volatile than CF Acquisition IV. It trades about -0.01 of its total potential returns per unit of risk. CF Acquisition IV is currently generating about 0.12 per unit of volatility. If you would invest  1,026  in CF Acquisition IV on September 17, 2024 and sell it today you would earn a total of  26.00  from holding CF Acquisition IV or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	22.64%
Values	Daily Returns

Bank Rakyat  vs.  CF Acquisition IV

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.

CF Acquisition IV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Acquisition IV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, CF Acquisition is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bank Rakyat and CF Acquisition

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

The idea behind Bank Rakyat and CF Acquisition IV 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.