Correlation Between Malayan Banking and Riverview Rubber

Can any of the company-specific risk be diversified away by investing in both Malayan Banking and Riverview 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 Malayan Banking and Riverview Rubber 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 Riverview Rubber Estates, you can compare the effects of market volatilities on Malayan Banking and Riverview 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 Malayan Banking with a short position of Riverview Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malayan Banking and Riverview Rubber.

Diversification Opportunities for Malayan Banking and Riverview Rubber

0.2

Correlation Coefficient

Malayan Banking  Riverview Rubber

Modest diversification

The 3 months correlation between Malayan and Riverview is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Riverview Rubber Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverview Rubber Estates 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 Riverview Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverview Rubber Estates has no effect on the direction of Malayan Banking i.e., Malayan Banking and Riverview Rubber go up and down completely randomly.

Pair Corralation between Malayan Banking and Riverview Rubber

Assuming the 90 days trading horizon Malayan Banking is expected to generate 5.66 times less return on investment than Riverview Rubber. But when comparing it to its historical volatility, Malayan Banking Bhd is 3.31 times less risky than Riverview Rubber. It trades about 0.05 of its potential returns per unit of risk. Riverview Rubber Estates is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  308.00  in Riverview Rubber Estates on October 10, 2024 and sell it today you would earn a total of  10.00  from holding Riverview Rubber Estates or generate 3.25% 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.  Riverview Rubber Estates

Malayan Banking Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Riverview Rubber Estates

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Riverview Rubber Estates are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Riverview Rubber 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 Riverview Rubber

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

The idea behind Malayan Banking Bhd and Riverview Rubber Estates 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.