Correlation Between BANK RAKYAT and Shoprite Holdings

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

By analyzing existing cross correlation between BANK RAKYAT IND and Shoprite Holdings Limited, you can compare the effects of market volatilities on BANK RAKYAT and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Shoprite Holdings.

Diversification Opportunities for BANK RAKYAT and Shoprite Holdings

-0.73

Correlation Coefficient

BANK RAKYAT  Shoprite Holdings

Pay attention - limited upside

The 3 months correlation between BANK and Shoprite is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 IND are associated (or correlated) with Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and Shoprite Holdings go up and down completely randomly.

Pair Corralation between BANK RAKYAT and Shoprite Holdings

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Shoprite Holdings. In addition to that, BANK RAKYAT is 1.37 times more volatile than Shoprite Holdings Limited. It trades about -0.24 of its total potential returns per unit of risk. Shoprite Holdings Limited is currently generating about -0.08 per unit of volatility. If you would invest  1,610  in Shoprite Holdings Limited on September 24, 2024 and sell it today you would lose (50.00) from holding Shoprite Holdings Limited or give up 3.11% of portfolio value over 90 days.

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

BANK RAKYAT IND  vs.  Shoprite Holdings Limited

BANK RAKYAT IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK RAKYAT IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shoprite Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shoprite Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shoprite Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK RAKYAT and Shoprite Holdings

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

The idea behind BANK RAKYAT IND and Shoprite Holdings Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.