Correlation Between Carlsberg Brewery and Kuala Lumpur

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

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

Diversification Opportunities for Carlsberg Brewery and Kuala Lumpur

-0.17

Correlation Coefficient

Carlsberg Brewery  Kuala Lumpur

Good diversification

The 3 months correlation between Carlsberg and Kuala is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and Kuala Lumpur Kepong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuala Lumpur Kepong and Carlsberg Brewery 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 Carlsberg Brewery Malaysia are associated (or correlated) with Kuala Lumpur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuala Lumpur Kepong has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and Kuala Lumpur go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and Kuala Lumpur

Assuming the 90 days trading horizon Carlsberg Brewery Malaysia is expected to generate 0.54 times more return on investment than Kuala Lumpur. However, Carlsberg Brewery Malaysia is 1.84 times less risky than Kuala Lumpur. It trades about 0.07 of its potential returns per unit of risk. Kuala Lumpur Kepong is currently generating about -0.05 per unit of risk. If you would invest  1,946  in Carlsberg Brewery Malaysia on October 25, 2024 and sell it today you would earn a total of  56.00  from holding Carlsberg Brewery Malaysia or generate 2.88% return on investment over 90 days.

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

Carlsberg Brewery Malaysia  vs.  Kuala Lumpur Kepong

Carlsberg Brewery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 5 (%) 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.

Kuala Lumpur Kepong

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuala Lumpur Kepong has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Carlsberg Brewery and Kuala Lumpur

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

The idea behind Carlsberg Brewery Malaysia and Kuala Lumpur Kepong 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.