Correlation Between PESTECH International and Daya Materials

Can any of the company-specific risk be diversified away by investing in both PESTECH International and Daya Materials 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 PESTECH International and Daya Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PESTECH International Bhd and Daya Materials Bhd, you can compare the effects of market volatilities on PESTECH International and Daya Materials 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 PESTECH International with a short position of Daya Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of PESTECH International and Daya Materials.

Diversification Opportunities for PESTECH International and Daya Materials

-0.32

Correlation Coefficient

PESTECH International  Daya Materials

Very good diversification

The 3 months correlation between PESTECH and Daya is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PESTECH International Bhd and Daya Materials Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daya Materials Bhd and PESTECH International 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 PESTECH International Bhd are associated (or correlated) with Daya Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daya Materials Bhd has no effect on the direction of PESTECH International i.e., PESTECH International and Daya Materials go up and down completely randomly.

Pair Corralation between PESTECH International and Daya Materials

Assuming the 90 days trading horizon PESTECH International Bhd is expected to generate 1.05 times more return on investment than Daya Materials. However, PESTECH International is 1.05 times more volatile than Daya Materials Bhd. It trades about 0.41 of its potential returns per unit of risk. Daya Materials Bhd is currently generating about 0.03 per unit of risk. If you would invest  13.00  in PESTECH International Bhd on October 10, 2024 and sell it today you would earn a total of  8.00  from holding PESTECH International Bhd or generate 61.54% return on investment over 90 days.

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

PESTECH International Bhd  vs.  Daya Materials Bhd

PESTECH International Bhd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PESTECH International Bhd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PESTECH International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Daya Materials Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daya Materials 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 PESTECH International and Daya Materials

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

The idea behind PESTECH International Bhd and Daya Materials 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.