Correlation Between PESTECH International and Berjaya Food

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

Diversification Opportunities for PESTECH International and Berjaya Food

-0.5

Correlation Coefficient

PESTECH International  Berjaya Food

Very good diversification

The 3 months correlation between PESTECH and Berjaya is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding PESTECH International Bhd and Berjaya Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berjaya Food 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 Berjaya Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berjaya Food Bhd has no effect on the direction of PESTECH International i.e., PESTECH International and Berjaya Food go up and down completely randomly.

Pair Corralation between PESTECH International and Berjaya Food

Assuming the 90 days trading horizon PESTECH International Bhd is expected to generate 3.13 times more return on investment than Berjaya Food. However, PESTECH International is 3.13 times more volatile than Berjaya Food Bhd. It trades about 0.41 of its potential returns per unit of risk. Berjaya Food Bhd is currently generating about 0.01 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

PESTECH International Bhd  vs.  Berjaya Food 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.

Berjaya Food Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berjaya Food Bhd 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PESTECH International and Berjaya Food

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

The idea behind PESTECH International Bhd and Berjaya Food 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.