Correlation Between Sungei Bagan and Carlsberg Brewery

Can any of the company-specific risk be diversified away by investing in both Sungei Bagan and Carlsberg Brewery 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 Sungei Bagan and Carlsberg Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sungei Bagan Rubber and Carlsberg Brewery Malaysia, you can compare the effects of market volatilities on Sungei Bagan and Carlsberg Brewery 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 Sungei Bagan with a short position of Carlsberg Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungei Bagan and Carlsberg Brewery.

Diversification Opportunities for Sungei Bagan and Carlsberg Brewery

-0.89

Correlation Coefficient

Sungei Bagan  Carlsberg Brewery

Pay attention - limited upside

The 3 months correlation between Sungei and Carlsberg is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sungei Bagan Rubber and Carlsberg Brewery Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg Brewery and Sungei Bagan 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 Sungei Bagan Rubber are associated (or correlated) with Carlsberg Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg Brewery has no effect on the direction of Sungei Bagan i.e., Sungei Bagan and Carlsberg Brewery go up and down completely randomly.

Pair Corralation between Sungei Bagan and Carlsberg Brewery

Assuming the 90 days trading horizon Sungei Bagan Rubber is expected to generate 2.07 times more return on investment than Carlsberg Brewery. However, Sungei Bagan is 2.07 times more volatile than Carlsberg Brewery Malaysia. It trades about 0.04 of its potential returns per unit of risk. Carlsberg Brewery Malaysia is currently generating about 0.05 per unit of risk. If you would invest  484.00  in Sungei Bagan Rubber on October 24, 2024 and sell it today you would earn a total of  75.00  from holding Sungei Bagan Rubber or generate 15.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Sungei Bagan Rubber  vs.  Carlsberg Brewery Malaysia

Sungei Bagan Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungei Bagan Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Carlsberg Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Carlsberg Brewery 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 Sungei Bagan and Carlsberg Brewery

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

The idea behind Sungei Bagan Rubber and Carlsberg Brewery 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.