Correlation Between Petronas Chemicals and PMB Technology

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

Diversification Opportunities for Petronas Chemicals and PMB Technology

0.73

Correlation Coefficient

Petronas Chemicals  PMB Technology

Poor diversification

The 3 months correlation between Petronas and PMB is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and PMB Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMB Technology 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 PMB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMB Technology Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and PMB Technology go up and down completely randomly.

Pair Corralation between Petronas Chemicals and PMB Technology

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the PMB Technology. In addition to that, Petronas Chemicals is 1.7 times more volatile than PMB Technology Bhd. It trades about -0.1 of its total potential returns per unit of risk. PMB Technology Bhd is currently generating about -0.07 per unit of volatility. If you would invest  172.00  in PMB Technology Bhd on November 29, 2024 and sell it today you would lose (14.00) from holding PMB Technology Bhd or give up 8.14% of portfolio value over 90 days.

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

Petronas Chemicals Group  vs.  PMB Technology Bhd

Petronas Chemicals

Risk-Adjusted Performance

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PMB Technology Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days PMB Technology 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 PMB Technology

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

The idea behind Petronas Chemicals Group and PMB Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.