Correlation Between Petronas Chemicals and MISC Bhd

Can any of the company-specific risk be diversified away by investing in both Petronas Chemicals 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 Petronas Chemicals and MISC Bhd 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 MISC Bhd, you can compare the effects of market volatilities on Petronas Chemicals 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 Petronas Chemicals with a short position of MISC Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petronas Chemicals and MISC Bhd.

Diversification Opportunities for Petronas Chemicals and MISC Bhd

0.42

Correlation Coefficient

Petronas Chemicals  MISC Bhd

Very weak diversification

The 3 months correlation between Petronas and MISC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and MISC Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MISC 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 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 Petronas Chemicals i.e., Petronas Chemicals and MISC Bhd go up and down completely randomly.

Pair Corralation between Petronas Chemicals and MISC Bhd

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the MISC Bhd. In addition to that, Petronas Chemicals is 1.49 times more volatile than MISC Bhd. It trades about -0.16 of its total potential returns per unit of risk. MISC Bhd is currently generating about -0.14 per unit of volatility. If you would invest  823.00  in MISC Bhd on September 2, 2024 and sell it today you would lose (98.00) from holding MISC Bhd or give up 11.91% of portfolio value over 90 days.

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

Petronas Chemicals Group  vs.  MISC 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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MISC Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MISC Bhd 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.

Pair Trading with Petronas Chemicals and MISC Bhd

The main advantage of trading using opposite Petronas Chemicals and MISC Bhd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petronas Chemicals 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 Petronas Chemicals Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.