Correlation Between United Plantations and Malayan Banking

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

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

Diversification Opportunities for United Plantations and Malayan Banking

-0.94

Correlation Coefficient

United Plantations  Malayan Banking

Pay attention - limited upside

The 3 months correlation between United and Malayan is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding United Plantations 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 United Plantations 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 United Plantations 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 United Plantations i.e., United Plantations and Malayan Banking go up and down completely randomly.

Pair Corralation between United Plantations and Malayan Banking

Assuming the 90 days trading horizon United Plantations Bhd is expected to generate 3.34 times more return on investment than Malayan Banking. However, United Plantations is 3.34 times more volatile than Malayan Banking Bhd. It trades about 0.04 of its potential returns per unit of risk. Malayan Banking Bhd is currently generating about 0.13 per unit of risk. If you would invest  3,066  in United Plantations Bhd on October 2, 2024 and sell it today you would earn a total of  42.00  from holding United Plantations Bhd or generate 1.37% return on investment over 90 days.

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

United Plantations Bhd  vs.  Malayan Banking Bhd

United Plantations Bhd

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Plantations Bhd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Plantations disclosed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with United Plantations and Malayan Banking

The main advantage of trading using opposite United Plantations and Malayan Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Plantations 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 United Plantations 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.