Correlation Between Sunway Construction and Kawan Food

Can any of the company-specific risk be diversified away by investing in both Sunway Construction and Kawan 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 Sunway Construction and Kawan Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunway Construction Group and Kawan Food Bhd, you can compare the effects of market volatilities on Sunway Construction and Kawan 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 Sunway Construction with a short position of Kawan Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunway Construction and Kawan Food.

Diversification Opportunities for Sunway Construction and Kawan Food

0.21

Correlation Coefficient

Sunway Construction  Kawan Food

Modest diversification

The 3 months correlation between Sunway and Kawan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sunway Construction Group and Kawan Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawan Food Bhd and Sunway Construction 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 Sunway Construction Group are associated (or correlated) with Kawan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawan Food Bhd has no effect on the direction of Sunway Construction i.e., Sunway Construction and Kawan Food go up and down completely randomly.

Pair Corralation between Sunway Construction and Kawan Food

Assuming the 90 days trading horizon Sunway Construction Group is expected to under-perform the Kawan Food. In addition to that, Sunway Construction is 3.56 times more volatile than Kawan Food Bhd. It trades about -0.23 of its total potential returns per unit of risk. Kawan Food Bhd is currently generating about -0.1 per unit of volatility. If you would invest  165.00  in Kawan Food Bhd on October 25, 2024 and sell it today you would lose (4.00) from holding Kawan Food Bhd or give up 2.42% of portfolio value over 90 days.

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

Sunway Construction Group  vs.  Kawan Food Bhd

Sunway Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunway Construction Group 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.

Kawan Food Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawan Food Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kawan Food 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 Sunway Construction and Kawan Food

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

The idea behind Sunway Construction Group and Kawan 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.