Correlation Between Batu Kawan and SFP Tech

Can any of the company-specific risk be diversified away by investing in both Batu Kawan and SFP Tech 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 Batu Kawan and SFP Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Batu Kawan Bhd and SFP Tech Holdings, you can compare the effects of market volatilities on Batu Kawan and SFP Tech 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 Batu Kawan with a short position of SFP Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Batu Kawan and SFP Tech.

Diversification Opportunities for Batu Kawan and SFP Tech

0.51

Correlation Coefficient

Batu Kawan  SFP Tech

Very weak diversification

The 3 months correlation between Batu and SFP is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Batu Kawan Bhd and SFP Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFP Tech Holdings and Batu Kawan 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 Batu Kawan Bhd are associated (or correlated) with SFP Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFP Tech Holdings has no effect on the direction of Batu Kawan i.e., Batu Kawan and SFP Tech go up and down completely randomly.

Pair Corralation between Batu Kawan and SFP Tech

Assuming the 90 days trading horizon Batu Kawan Bhd is expected to generate 0.27 times more return on investment than SFP Tech. However, Batu Kawan Bhd is 3.66 times less risky than SFP Tech. It trades about 0.0 of its potential returns per unit of risk. SFP Tech Holdings is currently generating about 0.0 per unit of risk. If you would invest  2,046  in Batu Kawan Bhd on October 5, 2024 and sell it today you would lose (28.00) from holding Batu Kawan Bhd or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.3%
Values	Daily Returns

Batu Kawan Bhd  vs.  SFP Tech Holdings

Batu Kawan Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Batu Kawan Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Batu Kawan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SFP Tech Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SFP Tech Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, SFP Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Batu Kawan and SFP Tech

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

The idea behind Batu Kawan Bhd and SFP Tech Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.