Correlation Between Tex Cycle and Eversafe Rubber

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

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

Diversification Opportunities for Tex Cycle and Eversafe Rubber

0.11

Correlation Coefficient

Tex Cycle  Eversafe Rubber

Average diversification

The 3 months correlation between Tex and Eversafe is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tex Cycle Technology and Eversafe Rubber Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversafe Rubber Bhd and Tex Cycle 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 Tex Cycle Technology are associated (or correlated) with Eversafe Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversafe Rubber Bhd has no effect on the direction of Tex Cycle i.e., Tex Cycle and Eversafe Rubber go up and down completely randomly.

Pair Corralation between Tex Cycle and Eversafe Rubber

Assuming the 90 days trading horizon Tex Cycle is expected to generate 1.09 times less return on investment than Eversafe Rubber. But when comparing it to its historical volatility, Tex Cycle Technology is 2.78 times less risky than Eversafe Rubber. It trades about 0.21 of its potential returns per unit of risk. Eversafe Rubber Bhd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Eversafe Rubber Bhd on September 27, 2024 and sell it today you would earn a total of  1.00  from holding Eversafe Rubber Bhd or generate 7.14% return on investment over 90 days.

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

Tex Cycle Technology  vs.  Eversafe Rubber Bhd

Tex Cycle Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tex Cycle Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tex Cycle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eversafe Rubber Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eversafe Rubber Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tex Cycle and Eversafe Rubber

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

The idea behind Tex Cycle Technology and Eversafe Rubber 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..