Correlation Between HP and Bank Rakyat

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

By analyzing existing cross correlation between HP Inc and Bank Rakyat, you can compare the effects of market volatilities on HP and Bank Rakyat 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 HP with a short position of Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Bank Rakyat.

Diversification Opportunities for HP and Bank Rakyat

-0.65

Correlation Coefficient

HP  Bank Rakyat

Excellent diversification

The 3 months correlation between HP and Bank is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat and HP 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 HP Inc are associated (or correlated) with Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of HP i.e., HP and Bank Rakyat go up and down completely randomly.

Pair Corralation between HP and Bank Rakyat

Considering the 90-day investment horizon HP Inc is expected to generate 1.2 times more return on investment than Bank Rakyat. However, HP is 1.2 times more volatile than Bank Rakyat. It trades about 0.02 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.18 per unit of risk. If you would invest  3,509  in HP Inc on September 1, 2024 and sell it today you would earn a total of  34.00  from holding HP Inc or generate 0.97% return on investment over 90 days.

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

HP Inc  vs.  Bank Rakyat

HP Inc

Risk-Adjusted Performance

1 of 100

Weak

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

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HP and Bank Rakyat

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

The idea behind HP Inc and Bank Rakyat 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.