Correlation Between Preferred Bank and Keck Seng

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

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

Diversification Opportunities for Preferred Bank and Keck Seng

-0.29

Correlation Coefficient

Preferred Bank  Keck Seng

Very good diversification

The 3 months correlation between Preferred and Keck is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and Keck Seng Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keck Seng Investments and Preferred 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 Preferred Bank are associated (or correlated) with Keck Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keck Seng Investments has no effect on the direction of Preferred Bank i.e., Preferred Bank and Keck Seng go up and down completely randomly.

Pair Corralation between Preferred Bank and Keck Seng

Assuming the 90 days horizon Preferred Bank is expected to under-perform the Keck Seng. But the stock apears to be less risky and, when comparing its historical volatility, Preferred Bank is 2.79 times less risky than Keck Seng. The stock trades about -0.06 of its potential returns per unit of risk. The Keck Seng Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Keck Seng Investments on December 20, 2024 and sell it today you would earn a total of  3.00  from holding Keck Seng Investments or generate 12.5% return on investment over 90 days.

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

Preferred Bank  vs.  Keck Seng Investments

Preferred Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Preferred Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Keck Seng Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keck Seng Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Keck Seng reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Preferred Bank and Keck Seng

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

The idea behind Preferred Bank and Keck Seng Investments 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.