Correlation Between BANK RAKYAT and OSRAM LICHT

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

Diversification Opportunities for BANK RAKYAT and OSRAM LICHT

-0.83

Correlation Coefficient

BANK RAKYAT  OSRAM LICHT

Pay attention - limited upside

The 3 months correlation between BANK and OSRAM is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BANK RAKYAT IND and OSRAM LICHT N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSRAM LICHT N 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 OSRAM LICHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSRAM LICHT N has no effect on the direction of BANK RAKYAT i.e., BANK RAKYAT and OSRAM LICHT go up and down completely randomly.

Pair Corralation between BANK RAKYAT and OSRAM LICHT

Assuming the 90 days trading horizon BANK RAKYAT IND is expected to under-perform the OSRAM LICHT. In addition to that, BANK RAKYAT is 5.64 times more volatile than OSRAM LICHT N. It trades about -0.21 of its total potential returns per unit of risk. OSRAM LICHT N is currently generating about 0.12 per unit of volatility. If you would invest  5,140  in OSRAM LICHT N on September 23, 2024 and sell it today you would earn a total of  40.00  from holding OSRAM LICHT N or generate 0.78% return on investment over 90 days.

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

BANK RAKYAT IND  vs.  OSRAM LICHT N

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

OSRAM LICHT N

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OSRAM LICHT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BANK RAKYAT and OSRAM LICHT

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

The idea behind BANK RAKYAT IND and OSRAM LICHT N 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.