Correlation Between ECS ICT and Dagang Nexchange

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

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

Diversification Opportunities for ECS ICT and Dagang Nexchange

0.09

Correlation Coefficient

ECS ICT  Dagang Nexchange

Significant diversification

The 3 months correlation between ECS and Dagang is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ECS ICT Bhd and Dagang Nexchange Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dagang Nexchange Bhd and ECS ICT 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 ECS ICT Bhd are associated (or correlated) with Dagang Nexchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dagang Nexchange Bhd has no effect on the direction of ECS ICT i.e., ECS ICT and Dagang Nexchange go up and down completely randomly.

Pair Corralation between ECS ICT and Dagang Nexchange

Assuming the 90 days trading horizon ECS ICT is expected to generate 1.35 times less return on investment than Dagang Nexchange. But when comparing it to its historical volatility, ECS ICT Bhd is 1.69 times less risky than Dagang Nexchange. It trades about 0.12 of its potential returns per unit of risk. Dagang Nexchange Bhd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Dagang Nexchange Bhd on September 25, 2024 and sell it today you would earn a total of  2.00  from holding Dagang Nexchange Bhd or generate 5.56% return on investment over 90 days.

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

ECS ICT Bhd  vs.  Dagang Nexchange Bhd

ECS ICT Bhd

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECS ICT Bhd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ECS ICT disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dagang Nexchange Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dagang Nexchange Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Dagang Nexchange disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECS ICT and Dagang Nexchange

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

The idea behind ECS ICT Bhd and Dagang Nexchange 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.