Correlation Between BANK RAKYAT and Veolia Environnement

Can any of the company-specific risk be diversified away by investing in both BANK RAKYAT and Veolia Environnement 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 Veolia Environnement 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 Veolia Environnement SA, you can compare the effects of market volatilities on BANK RAKYAT and Veolia Environnement 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 Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK RAKYAT and Veolia Environnement.

Diversification Opportunities for BANK RAKYAT and Veolia Environnement

0.73

Correlation Coefficient

BANK RAKYAT  Veolia Environnement

Poor diversification

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

Pair Corralation between BANK RAKYAT and Veolia Environnement

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the Veolia Environnement. In addition to that, BANK RAKYAT is 1.22 times more volatile than Veolia Environnement SA. It trades about -0.12 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.07 per unit of volatility. If you would invest  1,450  in Veolia Environnement SA on August 31, 2024 and sell it today you would lose (90.00) from holding Veolia Environnement SA or give up 6.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.78%
Values	Daily Returns

BANK RAKYAT IND  vs.  Veolia Environnement SA

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BANK RAKYAT and Veolia Environnement

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

The idea behind BANK RAKYAT IND and Veolia Environnement SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.