Correlation Between Sungei Bagan and FGV Holdings

Can any of the company-specific risk be diversified away by investing in both Sungei Bagan and FGV Holdings 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 FGV Holdings 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 FGV Holdings Bhd, you can compare the effects of market volatilities on Sungei Bagan and FGV Holdings 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 FGV Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungei Bagan and FGV Holdings.

Diversification Opportunities for Sungei Bagan and FGV Holdings

-0.26

Correlation Coefficient

Sungei Bagan  FGV Holdings

Very good diversification

The 3 months correlation between Sungei and FGV is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sungei Bagan Rubber and FGV Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGV Holdings Bhd 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 FGV Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGV Holdings Bhd has no effect on the direction of Sungei Bagan i.e., Sungei Bagan and FGV Holdings go up and down completely randomly.

Pair Corralation between Sungei Bagan and FGV Holdings

Assuming the 90 days trading horizon Sungei Bagan Rubber is expected to generate 1.37 times more return on investment than FGV Holdings. However, Sungei Bagan is 1.37 times more volatile than FGV Holdings Bhd. It trades about 0.06 of its potential returns per unit of risk. FGV Holdings Bhd is currently generating about 0.0 per unit of risk. If you would invest  339.00  in Sungei Bagan Rubber on October 11, 2024 and sell it today you would earn a total of  210.00  from holding Sungei Bagan Rubber or generate 61.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.36%
Values	Daily Returns

Sungei Bagan Rubber  vs.  FGV Holdings Bhd

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FGV Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FGV Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, FGV Holdings 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 FGV Holdings

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

The idea behind Sungei Bagan Rubber and FGV Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.