Correlation Between Public Bank and PIE Industrial

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

Diversification Opportunities for Public Bank and PIE Industrial

0.26

Correlation Coefficient

Public Bank  PIE Industrial

Modest diversification

The 3 months correlation between Public and PIE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and PIE Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIE Industrial 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 PIE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIE Industrial Bhd has no effect on the direction of Public Bank i.e., Public Bank and PIE Industrial go up and down completely randomly.

Pair Corralation between Public Bank and PIE Industrial

Assuming the 90 days trading horizon Public Bank is expected to generate 8.96 times less return on investment than PIE Industrial. But when comparing it to its historical volatility, Public Bank Bhd is 2.86 times less risky than PIE Industrial. It trades about 0.04 of its potential returns per unit of risk. PIE Industrial Bhd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  315.00  in PIE Industrial Bhd on October 9, 2024 and sell it today you would earn a total of  332.00  from holding PIE Industrial Bhd or generate 105.4% return on investment over 90 days.

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

Public Bank Bhd  vs.  PIE Industrial 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.

PIE Industrial Bhd

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIE Industrial Bhd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PIE Industrial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Public Bank and PIE Industrial

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

The idea behind Public Bank Bhd and PIE 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.