Correlation Between ECM Libra and Bank Islam

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

By analyzing existing cross correlation between ECM Libra Financial and Bank Islam Malaysia, you can compare the effects of market volatilities on ECM Libra and Bank Islam 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 ECM Libra with a short position of Bank Islam. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECM Libra and Bank Islam.

Diversification Opportunities for ECM Libra and Bank Islam

0.12

Correlation Coefficient

ECM Libra  Bank Islam

Average diversification

The 3 months correlation between ECM and Bank is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ECM Libra Financial and Bank Islam Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Islam Malaysia and ECM Libra 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 ECM Libra Financial are associated (or correlated) with Bank Islam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Islam Malaysia has no effect on the direction of ECM Libra i.e., ECM Libra and Bank Islam go up and down completely randomly.

Pair Corralation between ECM Libra and Bank Islam

Assuming the 90 days trading horizon ECM Libra Financial is expected to generate 4.76 times more return on investment than Bank Islam. However, ECM Libra is 4.76 times more volatile than Bank Islam Malaysia. It trades about 0.08 of its potential returns per unit of risk. Bank Islam Malaysia is currently generating about 0.05 per unit of risk. If you would invest  17.00  in ECM Libra Financial on December 23, 2024 and sell it today you would earn a total of  3.00  from holding ECM Libra Financial or generate 17.65% return on investment over 90 days.

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

ECM Libra Financial  vs.  Bank Islam Malaysia

ECM Libra Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECM Libra Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ECM Libra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Islam Malaysia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Islam Malaysia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank Islam 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 ECM Libra and Bank Islam

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

The idea behind ECM Libra Financial and Bank Islam Malaysia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.