Correlation Between Daya Materials and CPE Technology

Can any of the company-specific risk be diversified away by investing in both Daya Materials and CPE Technology 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 Daya Materials and CPE Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Daya Materials and CPE Technology

-0.38

Correlation Coefficient

Daya Materials  CPE Technology

Very good diversification

The 3 months correlation between Daya and CPE is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Daya Materials Bhd and CPE Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPE Technology Berhad and Daya Materials 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 Daya Materials Bhd are associated (or correlated) with CPE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPE Technology Berhad has no effect on the direction of Daya Materials i.e., Daya Materials and CPE Technology go up and down completely randomly.

Pair Corralation between Daya Materials and CPE Technology

Assuming the 90 days trading horizon Daya Materials Bhd is expected to under-perform the CPE Technology. In addition to that, Daya Materials is 2.68 times more volatile than CPE Technology Berhad. It trades about -0.11 of its total potential returns per unit of risk. CPE Technology Berhad is currently generating about 0.26 per unit of volatility. If you would invest  89.00  in CPE Technology Berhad on October 12, 2024 and sell it today you would earn a total of  6.00  from holding CPE Technology Berhad or generate 6.74% return on investment over 90 days.

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

Daya Materials Bhd  vs.  CPE Technology Berhad

Daya Materials Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daya Materials 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.

CPE Technology Berhad

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CPE Technology Berhad are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, CPE Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daya Materials and CPE Technology

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

The idea behind Daya Materials Bhd and CPE Technology Berhad 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.