Correlation Between Kluang Rubber and PIE Industrial

Can any of the company-specific risk be diversified away by investing in both Kluang Rubber and PIE Industrial 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 Kluang Rubber and PIE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kluang Rubber and PIE Industrial

0.02

Correlation Coefficient

Kluang Rubber  PIE Industrial

Significant diversification

The 3 months correlation between Kluang and PIE is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kluang Rubber and PIE Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIE Industrial Bhd and Kluang Rubber 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 Kluang Rubber are associated (or correlated) with PIE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIE Industrial Bhd has no effect on the direction of Kluang Rubber i.e., Kluang Rubber and PIE Industrial go up and down completely randomly.

Pair Corralation between Kluang Rubber and PIE Industrial

Assuming the 90 days trading horizon Kluang Rubber is expected to under-perform the PIE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Kluang Rubber is 1.85 times less risky than PIE Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The PIE Industrial Bhd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  528.00  in PIE Industrial Bhd on October 24, 2024 and sell it today you would earn a total of  6.00  from holding PIE Industrial Bhd or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Kluang Rubber  vs.  PIE Industrial Bhd

Kluang Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kluang Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kluang Rubber is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PIE Industrial Bhd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIE Industrial Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PIE Industrial 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 Kluang Rubber and PIE Industrial

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

The idea behind Kluang Rubber and PIE Industrial 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.