Correlation Between Malayan Banking and Cengild Medical

Can any of the company-specific risk be diversified away by investing in both Malayan Banking and Cengild Medical 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 Malayan Banking and Cengild Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Malayan Banking and Cengild Medical

0.26

Correlation Coefficient

Malayan Banking  Cengild Medical

Modest diversification

The 3 months correlation between Malayan and Cengild is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Cengild Medical Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cengild Medical Berhad and Malayan Banking 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 Malayan Banking Bhd are associated (or correlated) with Cengild Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cengild Medical Berhad has no effect on the direction of Malayan Banking i.e., Malayan Banking and Cengild Medical go up and down completely randomly.

Pair Corralation between Malayan Banking and Cengild Medical

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to generate 0.27 times more return on investment than Cengild Medical. However, Malayan Banking Bhd is 3.65 times less risky than Cengild Medical. It trades about 0.16 of its potential returns per unit of risk. Cengild Medical Berhad is currently generating about 0.01 per unit of risk. If you would invest  1,008  in Malayan Banking Bhd on December 1, 2024 and sell it today you would earn a total of  64.00  from holding Malayan Banking Bhd or generate 6.35% return on investment over 90 days.

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

Malayan Banking Bhd  vs.  Cengild Medical Berhad

Malayan Banking Bhd

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Malayan Banking Bhd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Malayan Banking may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cengild Medical Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cengild Medical Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cengild Medical 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 Malayan Banking and Cengild Medical

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

The idea behind Malayan Banking Bhd and Cengild Medical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.