Correlation Between Telekom Malaysia and Genetec Technology

Can any of the company-specific risk be diversified away by investing in both Telekom Malaysia and Genetec 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 Telekom Malaysia and Genetec Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Telekom Malaysia and Genetec Technology

0.38

Correlation Coefficient

Telekom Malaysia  Genetec Technology

Weak diversification

The 3 months correlation between Telekom and Genetec is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Telekom Malaysia Bhd and Genetec Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genetec Technology Bhd and Telekom Malaysia 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 Telekom Malaysia Bhd are associated (or correlated) with Genetec Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genetec Technology Bhd has no effect on the direction of Telekom Malaysia i.e., Telekom Malaysia and Genetec Technology go up and down completely randomly.

Pair Corralation between Telekom Malaysia and Genetec Technology

Assuming the 90 days trading horizon Telekom Malaysia is expected to generate 2.08 times less return on investment than Genetec Technology. But when comparing it to its historical volatility, Telekom Malaysia Bhd is 3.66 times less risky than Genetec Technology. It trades about 0.3 of its potential returns per unit of risk. Genetec Technology Bhd is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Genetec Technology Bhd on September 29, 2024 and sell it today you would earn a total of  14.00  from holding Genetec Technology Bhd or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Telekom Malaysia Bhd  vs.  Genetec Technology Bhd

Telekom Malaysia Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Genetec Technology Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genetec Technology Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Genetec Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telekom Malaysia and Genetec Technology

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

The idea behind Telekom Malaysia Bhd and Genetec Technology 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.