Correlation Between Al Aqar and MISC Bhd

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

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

Diversification Opportunities for Al Aqar and MISC Bhd

0.23

Correlation Coefficient

Al Aqar  MISC Bhd

Modest diversification

The 3 months correlation between 5116 and MISC is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Al Aqar Healthcare and MISC Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MISC Bhd and Al Aqar 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 Al Aqar Healthcare are associated (or correlated) with MISC Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MISC Bhd has no effect on the direction of Al Aqar i.e., Al Aqar and MISC Bhd go up and down completely randomly.

Pair Corralation between Al Aqar and MISC Bhd

Assuming the 90 days trading horizon Al Aqar Healthcare is expected to under-perform the MISC Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Al Aqar Healthcare is 1.38 times less risky than MISC Bhd. The stock trades about -0.1 of its potential returns per unit of risk. The MISC Bhd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  748.00  in MISC Bhd on December 30, 2024 and sell it today you would lose (31.00) from holding MISC Bhd or give up 4.14% of portfolio value over 90 days.

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

Al Aqar Healthcare  vs.  MISC Bhd

Al Aqar Healthcare

Risk-Adjusted Performance

Very Weak

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

MISC Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days MISC Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MISC Bhd 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 Al Aqar and MISC Bhd

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

The idea behind Al Aqar Healthcare and MISC 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.