Correlation Between Bank Rakyat and Niagara Mohawk

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

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

Diversification Opportunities for Bank Rakyat and Niagara Mohawk

-0.68

Correlation Coefficient

Bank Rakyat  Niagara Mohawk

Excellent diversification

The 3 months correlation between Bank and Niagara is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Niagara Mohawk go up and down completely randomly.

Pair Corralation between Bank Rakyat and Niagara Mohawk

Assuming the 90 days horizon Bank Rakyat is expected to generate 7.07 times less return on investment than Niagara Mohawk. But when comparing it to its historical volatility, Bank Rakyat is 1.47 times less risky than Niagara Mohawk. It trades about 0.0 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,599  in Niagara Mohawk Power on September 5, 2024 and sell it today you would lose (39.00) from holding Niagara Mohawk Power or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Bank Rakyat  vs.  Niagara Mohawk Power

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Niagara Mohawk Power

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Niagara Mohawk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Rakyat and Niagara Mohawk

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

The idea behind Bank Rakyat and Niagara Mohawk Power 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.