Correlation Between Petronas Chemicals and Pesona Metro

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

Diversification Opportunities for Petronas Chemicals and Pesona Metro

-0.16

Correlation Coefficient

Petronas Chemicals  Pesona Metro

Good diversification

The 3 months correlation between Petronas and Pesona is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and Pesona Metro Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pesona Metro Holdings 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 Pesona Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pesona Metro Holdings has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and Pesona Metro go up and down completely randomly.

Pair Corralation between Petronas Chemicals and Pesona Metro

Assuming the 90 days trading horizon Petronas Chemicals is expected to generate 2.57 times less return on investment than Pesona Metro. But when comparing it to its historical volatility, Petronas Chemicals Group is 1.01 times less risky than Pesona Metro. It trades about 0.15 of its potential returns per unit of risk. Pesona Metro Holdings is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Pesona Metro Holdings on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Pesona Metro Holdings or generate 20.83% return on investment over 90 days.

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

Petronas Chemicals Group  vs.  Pesona Metro Holdings

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.

Pesona Metro Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pesona Metro Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pesona Metro disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petronas Chemicals and Pesona Metro

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

The idea behind Petronas Chemicals Group and Pesona Metro Holdings 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.