Correlation Between Petronas Chemicals and Sapura Industrial

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

Diversification Opportunities for Petronas Chemicals and Sapura Industrial

0.35

Correlation Coefficient

Petronas Chemicals  Sapura Industrial

Weak diversification

The 3 months correlation between Petronas and Sapura is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and Sapura Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapura Industrial 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 Sapura Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapura Industrial Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and Sapura Industrial go up and down completely randomly.

Pair Corralation between Petronas Chemicals and Sapura Industrial

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the Sapura Industrial. In addition to that, Petronas Chemicals is 1.52 times more volatile than Sapura Industrial Bhd. It trades about -0.17 of its total potential returns per unit of risk. Sapura Industrial Bhd is currently generating about -0.02 per unit of volatility. If you would invest  86.00  in Sapura Industrial Bhd on December 25, 2024 and sell it today you would lose (3.00) from holding Sapura Industrial Bhd or give up 3.49% of portfolio value over 90 days.

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

Petronas Chemicals Group  vs.  Sapura Industrial 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sapura Industrial Bhd

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Petronas Chemicals Group and Sapura Industrial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.