Correlation Between Public Bank and Malayan Banking

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

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

Diversification Opportunities for Public Bank and Malayan Banking

0.63

Correlation Coefficient

Public Bank  Malayan Banking

Poor diversification

The 3 months correlation between Public and Malayan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and Malayan Banking Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malayan Banking Bhd and Public Bank 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 Public Bank Bhd are associated (or correlated) with Malayan Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malayan Banking Bhd has no effect on the direction of Public Bank i.e., Public Bank and Malayan Banking go up and down completely randomly.

Pair Corralation between Public Bank and Malayan Banking

Assuming the 90 days trading horizon Public Bank Bhd is expected to under-perform the Malayan Banking. In addition to that, Public Bank is 1.89 times more volatile than Malayan Banking Bhd. It trades about -0.06 of its total potential returns per unit of risk. Malayan Banking Bhd is currently generating about -0.05 per unit of volatility. If you would invest  1,042  in Malayan Banking Bhd on September 3, 2024 and sell it today you would lose (22.00) from holding Malayan Banking Bhd or give up 2.11% of portfolio value over 90 days.

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

Public Bank Bhd  vs.  Malayan Banking Bhd

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Public Bank and Malayan Banking

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

The idea behind Public Bank Bhd and Malayan Banking 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.