Correlation Between Malayan Banking and Fraser Neave

Can any of the company-specific risk be diversified away by investing in both Malayan Banking and Fraser Neave 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 Fraser Neave 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 Fraser Neave Holdings, you can compare the effects of market volatilities on Malayan Banking and Fraser Neave 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 Fraser Neave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malayan Banking and Fraser Neave.

Diversification Opportunities for Malayan Banking and Fraser Neave

0.68

Correlation Coefficient

Malayan Banking  Fraser Neave

Poor diversification

The 3 months correlation between Malayan and Fraser is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Fraser Neave Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fraser Neave Holdings 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 Fraser Neave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fraser Neave Holdings has no effect on the direction of Malayan Banking i.e., Malayan Banking and Fraser Neave go up and down completely randomly.

Pair Corralation between Malayan Banking and Fraser Neave

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to generate 0.63 times more return on investment than Fraser Neave. However, Malayan Banking Bhd is 1.59 times less risky than Fraser Neave. It trades about -0.06 of its potential returns per unit of risk. Fraser Neave Holdings is currently generating about -0.11 per unit of risk. If you would invest  1,047  in Malayan Banking Bhd on September 2, 2024 and sell it today you would lose (27.00) from holding Malayan Banking Bhd or give up 2.58% of portfolio value over 90 days.

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

Malayan Banking Bhd  vs.  Fraser Neave Holdings

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.

Fraser Neave Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fraser Neave Holdings 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.

Pair Trading with Malayan Banking and Fraser Neave

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

The idea behind Malayan Banking Bhd and Fraser Neave Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.