Correlation Between Petronas Chemicals and United Plantations

Can any of the company-specific risk be diversified away by investing in both Petronas Chemicals and United Plantations 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 Petronas Chemicals and United Plantations into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petronas Chemicals Group and United Plantations Bhd, you can compare the effects of market volatilities on Petronas Chemicals and United Plantations 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 Petronas Chemicals with a short position of United Plantations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petronas Chemicals and United Plantations.

Diversification Opportunities for Petronas Chemicals and United Plantations

-0.87

Correlation Coefficient

Petronas Chemicals  United Plantations

Pay attention - limited upside

The 3 months correlation between Petronas and United is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and United Plantations Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Plantations Bhd and Petronas Chemicals 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 Petronas Chemicals Group are associated (or correlated) with United Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Plantations Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and United Plantations go up and down completely randomly.

Pair Corralation between Petronas Chemicals and United Plantations

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the United Plantations. In addition to that, Petronas Chemicals is 1.53 times more volatile than United Plantations Bhd. It trades about -0.07 of its total potential returns per unit of risk. United Plantations Bhd is currently generating about 0.22 per unit of volatility. If you would invest  2,584  in United Plantations Bhd on September 30, 2024 and sell it today you would earn a total of  550.00  from holding United Plantations Bhd or generate 21.28% return on investment over 90 days.

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

Petronas Chemicals Group  vs.  United Plantations Bhd

Petronas Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petronas Chemicals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

United Plantations Bhd

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Plantations Bhd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, United Plantations disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petronas Chemicals and United Plantations

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

The idea behind Petronas Chemicals Group and United Plantations 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.