Correlation Between Malayan Banking and Sapura Industrial

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

Diversification Opportunities for Malayan Banking and Sapura Industrial

-0.71

Correlation Coefficient

Malayan Banking  Sapura Industrial

Pay attention - limited upside

The 3 months correlation between Malayan and Sapura is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Sapura Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapura Industrial Bhd 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 Sapura Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapura Industrial Bhd has no effect on the direction of Malayan Banking i.e., Malayan Banking and Sapura Industrial go up and down completely randomly.

Pair Corralation between Malayan Banking and Sapura Industrial

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to generate 0.34 times more return on investment than Sapura Industrial. However, Malayan Banking Bhd is 2.95 times less risky than Sapura Industrial. It trades about 0.21 of its potential returns per unit of risk. Sapura Industrial Bhd is currently generating about -0.08 per unit of risk. If you would invest  1,008  in Malayan Banking Bhd on October 25, 2024 and sell it today you would earn a total of  28.00  from holding Malayan Banking Bhd or generate 2.78% return on investment over 90 days.

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

Malayan Banking Bhd  vs.  Sapura Industrial Bhd

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.

Sapura Industrial Bhd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapura Industrial Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sapura Industrial 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 Sapura Industrial

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

The idea behind Malayan Banking Bhd and Sapura Industrial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.