Correlation Between ES Ceramics and KPJ Healthcare

Can any of the company-specific risk be diversified away by investing in both ES Ceramics and KPJ Healthcare 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 ES Ceramics and KPJ Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for ES Ceramics and KPJ Healthcare

-0.48

Correlation Coefficient

ES Ceramics  KPJ Healthcare

Very good diversification

The 3 months correlation between 0100 and KPJ is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and KPJ Healthcare Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPJ Healthcare Bhd and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with KPJ Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPJ Healthcare Bhd has no effect on the direction of ES Ceramics i.e., ES Ceramics and KPJ Healthcare go up and down completely randomly.

Pair Corralation between ES Ceramics and KPJ Healthcare

Assuming the 90 days trading horizon ES Ceramics Technology is expected to under-perform the KPJ Healthcare. In addition to that, ES Ceramics is 2.69 times more volatile than KPJ Healthcare Bhd. It trades about -0.03 of its total potential returns per unit of risk. KPJ Healthcare Bhd is currently generating about 0.28 per unit of volatility. If you would invest  192.00  in KPJ Healthcare Bhd on September 2, 2024 and sell it today you would earn a total of  57.00  from holding KPJ Healthcare Bhd or generate 29.69% return on investment over 90 days.

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

ES Ceramics Technology  vs.  KPJ Healthcare Bhd

ES Ceramics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ES Ceramics Technology 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.

KPJ Healthcare Bhd

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, KPJ Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ES Ceramics and KPJ Healthcare

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

The idea behind ES Ceramics Technology and KPJ Healthcare 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.