Correlation Between Malayan Banking and ITMAX System

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

Diversification Opportunities for Malayan Banking and ITMAX System

0.1

Correlation Coefficient

Malayan Banking  ITMAX System

Average diversification

The 3 months correlation between Malayan and ITMAX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and ITMAX System Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITMAX System 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 ITMAX System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITMAX System Berhad has no effect on the direction of Malayan Banking i.e., Malayan Banking and ITMAX System go up and down completely randomly.

Pair Corralation between Malayan Banking and ITMAX System

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to under-perform the ITMAX System. But the stock apears to be less risky and, when comparing its historical volatility, Malayan Banking Bhd is 2.2 times less risky than ITMAX System. The stock trades about -0.1 of its potential returns per unit of risk. The ITMAX System Berhad is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  364.00  in ITMAX System Berhad on September 27, 2024 and sell it today you would lose (10.00) from holding ITMAX System Berhad or give up 2.75% of portfolio value over 90 days.

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

Malayan Banking Bhd  vs.  ITMAX System Berhad

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.

ITMAX System Berhad

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Malayan Banking Bhd and ITMAX System 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.