Correlation Between Kluang Rubber and Kawan Food

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

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

Diversification Opportunities for Kluang Rubber and Kawan Food

0.19

Correlation Coefficient

Kluang Rubber  Kawan Food

Average diversification

The 3 months correlation between Kluang and Kawan is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kluang Rubber and Kawan Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawan Food 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 Kawan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawan Food Bhd has no effect on the direction of Kluang Rubber i.e., Kluang Rubber and Kawan Food go up and down completely randomly.

Pair Corralation between Kluang Rubber and Kawan Food

Assuming the 90 days trading horizon Kluang Rubber is expected to generate 2.65 times more return on investment than Kawan Food. However, Kluang Rubber is 2.65 times more volatile than Kawan Food Bhd. It trades about 0.09 of its potential returns per unit of risk. Kawan Food Bhd is currently generating about 0.04 per unit of risk. If you would invest  566.00  in Kluang Rubber on September 3, 2024 and sell it today you would earn a total of  18.00  from holding Kluang Rubber or generate 3.18% return on investment over 90 days.

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

Kluang Rubber  vs.  Kawan Food 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.

Kawan Food Bhd

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Kluang Rubber and Kawan Food 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.