Correlation Between Systech Bhd and Scientex Packaging

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

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

Diversification Opportunities for Systech Bhd and Scientex Packaging

0.84

Correlation Coefficient

Systech Bhd  Scientex Packaging

Very poor diversification

The 3 months correlation between Systech and Scientex is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Systech Bhd and Scientex Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientex Packaging and Systech Bhd 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 Systech Bhd are associated (or correlated) with Scientex Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientex Packaging has no effect on the direction of Systech Bhd i.e., Systech Bhd and Scientex Packaging go up and down completely randomly.

Pair Corralation between Systech Bhd and Scientex Packaging

Assuming the 90 days trading horizon Systech Bhd is expected to generate 1.74 times more return on investment than Scientex Packaging. However, Systech Bhd is 1.74 times more volatile than Scientex Packaging. It trades about -0.14 of its potential returns per unit of risk. Scientex Packaging is currently generating about -0.25 per unit of risk. If you would invest  32.00  in Systech Bhd on December 25, 2024 and sell it today you would lose (9.00) from holding Systech Bhd or give up 28.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.61%
Values	Daily Returns

Systech Bhd  vs.  Scientex Packaging

Systech Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Systech Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Scientex Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scientex Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Systech Bhd and Scientex Packaging

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

The idea behind Systech Bhd and Scientex Packaging 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.