Correlation Between Carlsberg Brewery and KL Technology

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

Diversification Opportunities for Carlsberg Brewery and KL Technology

0.59

Correlation Coefficient

Carlsberg Brewery  KL Technology

Very weak diversification

The 3 months correlation between Carlsberg and KLTE is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and KL Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KL Technology 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 KL Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KL Technology has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and KL Technology go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and KL Technology

Assuming the 90 days trading horizon Carlsberg Brewery is expected to generate 10.44 times less return on investment than KL Technology. But when comparing it to its historical volatility, Carlsberg Brewery Malaysia is 1.65 times less risky than KL Technology. It trades about 0.07 of its potential returns per unit of risk. KL Technology is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  5,966  in KL Technology on September 28, 2024 and sell it today you would earn a total of  552.00  from holding KL Technology or generate 9.25% return on investment over 90 days.

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

Carlsberg Brewery Malaysia  vs.  KL Technology

Pair Trading with Carlsberg Brewery and KL Technology

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

The idea behind Carlsberg Brewery Malaysia and KL Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.