Correlation Between Binasat Communications and Sime Darby

Can any of the company-specific risk be diversified away by investing in both Binasat Communications and Sime Darby 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 Binasat Communications and Sime Darby into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Binasat Communications and Sime Darby

-0.16

Correlation Coefficient

Binasat Communications  Sime Darby

Good diversification

The 3 months correlation between Binasat and Sime is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Binasat Communications Bhd and Sime Darby Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Bhd and Binasat Communications 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 Binasat Communications Bhd are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Bhd has no effect on the direction of Binasat Communications i.e., Binasat Communications and Sime Darby go up and down completely randomly.

Pair Corralation between Binasat Communications and Sime Darby

Assuming the 90 days trading horizon Binasat Communications Bhd is expected to under-perform the Sime Darby. In addition to that, Binasat Communications is 1.52 times more volatile than Sime Darby Bhd. It trades about -0.21 of its total potential returns per unit of risk. Sime Darby Bhd is currently generating about -0.11 per unit of volatility. If you would invest  237.00  in Sime Darby Bhd on October 11, 2024 and sell it today you would lose (8.00) from holding Sime Darby Bhd or give up 3.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Binasat Communications Bhd  vs.  Sime Darby Bhd

Binasat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby 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 Binasat Communications and Sime Darby

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

The idea behind Binasat Communications Bhd and Sime Darby 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.