Correlation Between Bank Islam and Resintech Bhd

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

Diversification Opportunities for Bank Islam and Resintech Bhd

-0.63

Correlation Coefficient

Bank Islam  Resintech Bhd

Excellent diversification

The 3 months correlation between Bank and Resintech is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank Islam Malaysia and Resintech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resintech 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 Resintech Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resintech Bhd has no effect on the direction of Bank Islam i.e., Bank Islam and Resintech Bhd go up and down completely randomly.

Pair Corralation between Bank Islam and Resintech Bhd

Assuming the 90 days trading horizon Bank Islam is expected to generate 2.12 times less return on investment than Resintech Bhd. But when comparing it to its historical volatility, Bank Islam Malaysia is 1.5 times less risky than Resintech Bhd. It trades about 0.03 of its potential returns per unit of risk. Resintech Bhd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Resintech Bhd on October 24, 2024 and sell it today you would earn a total of  18.00  from holding Resintech Bhd or generate 33.96% return on investment over 90 days.

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

Bank Islam Malaysia  vs.  Resintech 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.

Resintech Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Resintech Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Resintech Bhd 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 Bank Islam and Resintech Bhd

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

The idea behind Bank Islam Malaysia and Resintech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.