Correlation Between Public Bank and ITMAX System

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

Diversification Opportunities for Public Bank and ITMAX System

0.03

Correlation Coefficient

Public Bank  ITMAX System

Significant diversification

The 3 months correlation between Public and ITMAX is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank 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 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 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 Public Bank i.e., Public Bank and ITMAX System go up and down completely randomly.

Pair Corralation between Public Bank and ITMAX System

Assuming the 90 days trading horizon Public Bank Bhd is expected to under-perform the ITMAX System. But the stock apears to be less risky and, when comparing its historical volatility, Public Bank Bhd is 1.31 times less risky than ITMAX System. The stock trades about -0.01 of its potential returns per unit of risk. The ITMAX System Berhad is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  358.00  in ITMAX System Berhad on September 27, 2024 and sell it today you would lose (4.00) from holding ITMAX System Berhad or give up 1.12% of portfolio value over 90 days.

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

Public Bank Bhd  vs.  ITMAX System Berhad

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.

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 Public Bank and ITMAX System

The main advantage of trading using opposite Public Bank and ITMAX System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Bank 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 Public Bank 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.