Correlation Between CPE Technology and ECM Libra

Can any of the company-specific risk be diversified away by investing in both CPE Technology and ECM Libra 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 CPE Technology and ECM Libra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPE Technology Berhad and ECM Libra Financial, you can compare the effects of market volatilities on CPE Technology and ECM Libra 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 CPE Technology with a short position of ECM Libra. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPE Technology and ECM Libra.

Diversification Opportunities for CPE Technology and ECM Libra

-0.34

Correlation Coefficient

CPE Technology  ECM Libra

Very good diversification

The 3 months correlation between CPE and ECM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CPE Technology Berhad and ECM Libra Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECM Libra Financial and CPE Technology 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 CPE Technology Berhad are associated (or correlated) with ECM Libra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECM Libra Financial has no effect on the direction of CPE Technology i.e., CPE Technology and ECM Libra go up and down completely randomly.

Pair Corralation between CPE Technology and ECM Libra

Assuming the 90 days trading horizon CPE Technology Berhad is expected to under-perform the ECM Libra. But the stock apears to be less risky and, when comparing its historical volatility, CPE Technology Berhad is 2.68 times less risky than ECM Libra. The stock trades about -0.1 of its potential returns per unit of risk. The ECM Libra Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17.00  in ECM Libra Financial on October 24, 2024 and sell it today you would earn a total of  1.00  from holding ECM Libra Financial or generate 5.88% return on investment over 90 days.

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

CPE Technology Berhad  vs.  ECM Libra Financial

CPE Technology Berhad

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPE Technology Berhad are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, CPE Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ECM Libra Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECM Libra Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ECM Libra 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 CPE Technology and ECM Libra

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

The idea behind CPE Technology Berhad and ECM Libra Financial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.