Correlation Between Kuala Lumpur and Aeon Credit

Can any of the company-specific risk be diversified away by investing in both Kuala Lumpur and Aeon Credit 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 Kuala Lumpur and Aeon Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kuala Lumpur Kepong and Aeon Credit Service, you can compare the effects of market volatilities on Kuala Lumpur and Aeon Credit 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 Kuala Lumpur with a short position of Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuala Lumpur and Aeon Credit.

Diversification Opportunities for Kuala Lumpur and Aeon Credit

-0.24

Correlation Coefficient

Kuala Lumpur  Aeon Credit

Very good diversification

The 3 months correlation between Kuala and Aeon is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kuala Lumpur Kepong and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service and Kuala Lumpur 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 Kuala Lumpur Kepong are associated (or correlated) with Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of Kuala Lumpur i.e., Kuala Lumpur and Aeon Credit go up and down completely randomly.

Pair Corralation between Kuala Lumpur and Aeon Credit

Assuming the 90 days trading horizon Kuala Lumpur is expected to generate 8.56 times less return on investment than Aeon Credit. But when comparing it to its historical volatility, Kuala Lumpur Kepong is 1.08 times less risky than Aeon Credit. It trades about 0.01 of its potential returns per unit of risk. Aeon Credit Service is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  547.00  in Aeon Credit Service on September 24, 2024 and sell it today you would earn a total of  75.00  from holding Aeon Credit Service or generate 13.71% return on investment over 90 days.

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

Kuala Lumpur Kepong  vs.  Aeon Credit Service

Kuala Lumpur Kepong

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kuala Lumpur Kepong are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kuala Lumpur is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kuala Lumpur and Aeon Credit

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

The idea behind Kuala Lumpur Kepong and Aeon Credit Service 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.