Correlation Between YTL Hospitality and Top Glove

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

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

Diversification Opportunities for YTL Hospitality and Top Glove

0.42

Correlation Coefficient

YTL Hospitality  Top Glove

Very weak diversification

The 3 months correlation between YTL and Top is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding YTL Hospitality REIT and Top Glove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Glove and YTL Hospitality 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 YTL Hospitality REIT are associated (or correlated) with Top Glove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Glove has no effect on the direction of YTL Hospitality i.e., YTL Hospitality and Top Glove go up and down completely randomly.

Pair Corralation between YTL Hospitality and Top Glove

Assuming the 90 days trading horizon YTL Hospitality is expected to generate 12.97 times less return on investment than Top Glove. But when comparing it to its historical volatility, YTL Hospitality REIT is 4.37 times less risky than Top Glove. It trades about 0.03 of its potential returns per unit of risk. Top Glove is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Top Glove on September 4, 2024 and sell it today you would earn a total of  22.00  from holding Top Glove or generate 23.16% return on investment over 90 days.

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

YTL Hospitality REIT  vs.  Top Glove

YTL Hospitality REIT

Risk-Adjusted Performance

2 of 100

Weak

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.

Top Glove

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Top Glove disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YTL Hospitality and Top Glove

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

The idea behind YTL Hospitality REIT and Top Glove 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.