Correlation Between Insas Bhd and ES Ceramics

Can any of the company-specific risk be diversified away by investing in both Insas Bhd and ES Ceramics 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 Insas Bhd and ES Ceramics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Insas Bhd and ES Ceramics Technology, you can compare the effects of market volatilities on Insas Bhd and ES Ceramics 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 Insas Bhd with a short position of ES Ceramics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insas Bhd and ES Ceramics.

Diversification Opportunities for Insas Bhd and ES Ceramics

0.79

Correlation Coefficient

Insas Bhd  ES Ceramics

Poor diversification

The 3 months correlation between Insas and 0100 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Insas Bhd and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics Technology and Insas Bhd 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 Insas Bhd are associated (or correlated) with ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of Insas Bhd i.e., Insas Bhd and ES Ceramics go up and down completely randomly.

Pair Corralation between Insas Bhd and ES Ceramics

Assuming the 90 days trading horizon Insas Bhd is expected to generate 0.2 times more return on investment than ES Ceramics. However, Insas Bhd is 5.04 times less risky than ES Ceramics. It trades about -0.1 of its potential returns per unit of risk. ES Ceramics Technology is currently generating about -0.04 per unit of risk. If you would invest  90.00  in Insas Bhd on December 1, 2024 and sell it today you would lose (5.00) from holding Insas Bhd or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Insas Bhd  vs.  ES Ceramics Technology

Insas Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insas Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Insas Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ES Ceramics Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ES Ceramics Technology 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.

Pair Trading with Insas Bhd and ES Ceramics

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

The idea behind Insas Bhd and ES Ceramics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.