Correlation Between ITMAX System and KPJ Healthcare

Can any of the company-specific risk be diversified away by investing in both ITMAX System and KPJ Healthcare 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 ITMAX System and KPJ Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ITMAX System Berhad and KPJ Healthcare Bhd, you can compare the effects of market volatilities on ITMAX System and KPJ Healthcare 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 ITMAX System with a short position of KPJ Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITMAX System and KPJ Healthcare.

Diversification Opportunities for ITMAX System and KPJ Healthcare

0.04

Correlation Coefficient

ITMAX System  KPJ Healthcare

Significant diversification

The 3 months correlation between ITMAX and KPJ is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ITMAX System Berhad and KPJ Healthcare Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPJ Healthcare Bhd and ITMAX System 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 ITMAX System Berhad are associated (or correlated) with KPJ Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPJ Healthcare Bhd has no effect on the direction of ITMAX System i.e., ITMAX System and KPJ Healthcare go up and down completely randomly.

Pair Corralation between ITMAX System and KPJ Healthcare

Assuming the 90 days trading horizon ITMAX System is expected to generate 17.3 times less return on investment than KPJ Healthcare. But when comparing it to its historical volatility, ITMAX System Berhad is 1.2 times less risky than KPJ Healthcare. It trades about 0.01 of its potential returns per unit of risk. KPJ Healthcare Bhd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  211.00  in KPJ Healthcare Bhd on September 30, 2024 and sell it today you would earn a total of  27.00  from holding KPJ Healthcare Bhd or generate 12.8% return on investment over 90 days.

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

ITMAX System Berhad  vs.  KPJ Healthcare Bhd

ITMAX System Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

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

KPJ Healthcare Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, KPJ Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITMAX System and KPJ Healthcare

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

The idea behind ITMAX System Berhad and KPJ Healthcare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.