Correlation Between Bank Rakyat and AstraZeneca PLC

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

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

Diversification Opportunities for Bank Rakyat and AstraZeneca PLC

-0.85

Correlation Coefficient

Bank Rakyat  AstraZeneca PLC

Pay attention - limited upside

The 3 months correlation between Bank and AstraZeneca is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Bank Rakyat and AstraZeneca PLC

Assuming the 90 days horizon Bank Rakyat is expected to under-perform the AstraZeneca PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Rakyat is 1.25 times less risky than AstraZeneca PLC. The pink sheet trades about -0.04 of its potential returns per unit of risk. The AstraZeneca PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,321  in AstraZeneca PLC on February 14, 2024 and sell it today you would earn a total of  3,263  from holding AstraZeneca PLC or generate 26.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Bank Rakyat  vs.  AstraZeneca PLC

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

AstraZeneca PLC

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, AstraZeneca PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and AstraZeneca PLC

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

The idea behind Bank Rakyat and AstraZeneca PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.