Correlation Between Notion Vtec and RHB Bank

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

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

Diversification Opportunities for Notion Vtec and RHB Bank

0.55

Correlation Coefficient

Notion Vtec  RHB Bank

Very weak diversification

The 3 months correlation between Notion and RHB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Notion Vtec Bhd and RHB Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RHB Bank Bhd and Notion Vtec 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 Notion Vtec Bhd are associated (or correlated) with RHB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RHB Bank Bhd has no effect on the direction of Notion Vtec i.e., Notion Vtec and RHB Bank go up and down completely randomly.

Pair Corralation between Notion Vtec and RHB Bank

Assuming the 90 days trading horizon Notion Vtec Bhd is expected to generate 3.65 times more return on investment than RHB Bank. However, Notion Vtec is 3.65 times more volatile than RHB Bank Bhd. It trades about 0.21 of its potential returns per unit of risk. RHB Bank Bhd is currently generating about -0.16 per unit of risk. If you would invest  110.00  in Notion Vtec Bhd on September 25, 2024 and sell it today you would earn a total of  20.00  from holding Notion Vtec Bhd or generate 18.18% return on investment over 90 days.

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

Notion Vtec Bhd  vs.  RHB Bank Bhd

Notion Vtec Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Notion Vtec Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Notion Vtec disclosed solid returns over the last few months and may actually be approaching a breakup point.

RHB Bank Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RHB Bank Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, RHB Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Notion Vtec and RHB Bank

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

The idea behind Notion Vtec Bhd and RHB Bank Bhd 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.