Correlation Between Bank Islam and Malpac Holdings

Can any of the company-specific risk be diversified away by investing in both Bank Islam and Malpac Holdings 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 Bank Islam and Malpac Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Islam Malaysia and Malpac Holdings Bhd, you can compare the effects of market volatilities on Bank Islam and Malpac Holdings 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 Bank Islam with a short position of Malpac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Islam and Malpac Holdings.

Diversification Opportunities for Bank Islam and Malpac Holdings

0.33

Correlation Coefficient

Bank Islam  Malpac Holdings

Weak diversification

The 3 months correlation between Bank and Malpac is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank Islam Malaysia and Malpac Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malpac Holdings Bhd and Bank Islam 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 Bank Islam Malaysia are associated (or correlated) with Malpac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malpac Holdings Bhd has no effect on the direction of Bank Islam i.e., Bank Islam and Malpac Holdings go up and down completely randomly.

Pair Corralation between Bank Islam and Malpac Holdings

Assuming the 90 days trading horizon Bank Islam is expected to generate 4.99 times less return on investment than Malpac Holdings. But when comparing it to its historical volatility, Bank Islam Malaysia is 4.73 times less risky than Malpac Holdings. It trades about 0.03 of its potential returns per unit of risk. Malpac Holdings Bhd is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Malpac Holdings Bhd on October 11, 2024 and sell it today you would lose (14.00) from holding Malpac Holdings Bhd or give up 13.73% of portfolio value over 90 days.

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

Bank Islam Malaysia  vs.  Malpac Holdings Bhd

Bank Islam Malaysia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Islam Malaysia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bank Islam is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Malpac Holdings Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Malpac Holdings Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Malpac Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Islam and Malpac Holdings

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

The idea behind Bank Islam Malaysia and Malpac Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.