Correlation Between Dagang Nexchange and YTL Hospitality

Can any of the company-specific risk be diversified away by investing in both Dagang Nexchange and YTL Hospitality 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 Dagang Nexchange and YTL Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dagang Nexchange Bhd and YTL Hospitality REIT, you can compare the effects of market volatilities on Dagang Nexchange and YTL Hospitality 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 Dagang Nexchange with a short position of YTL Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dagang Nexchange and YTL Hospitality.

Diversification Opportunities for Dagang Nexchange and YTL Hospitality

0.27

Correlation Coefficient

Dagang Nexchange  YTL Hospitality

Modest diversification

The 3 months correlation between Dagang and YTL is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dagang Nexchange Bhd and YTL Hospitality REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YTL Hospitality REIT and Dagang Nexchange 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 Dagang Nexchange Bhd are associated (or correlated) with YTL Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YTL Hospitality REIT has no effect on the direction of Dagang Nexchange i.e., Dagang Nexchange and YTL Hospitality go up and down completely randomly.

Pair Corralation between Dagang Nexchange and YTL Hospitality

Assuming the 90 days trading horizon Dagang Nexchange Bhd is expected to generate 2.93 times more return on investment than YTL Hospitality. However, Dagang Nexchange is 2.93 times more volatile than YTL Hospitality REIT. It trades about 0.03 of its potential returns per unit of risk. YTL Hospitality REIT is currently generating about 0.04 per unit of risk. If you would invest  35.00  in Dagang Nexchange Bhd on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Dagang Nexchange Bhd or generate 2.86% return on investment over 90 days.

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

Dagang Nexchange Bhd  vs.  YTL Hospitality REIT

Dagang Nexchange Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dagang Nexchange Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Dagang Nexchange is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

YTL Hospitality REIT

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YTL Hospitality REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, YTL Hospitality 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 Dagang Nexchange and YTL Hospitality

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

The idea behind Dagang Nexchange Bhd and YTL Hospitality REIT 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.