Correlation Between CPE Technology and Bank Islam

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

Diversification Opportunities for CPE Technology and Bank Islam

-0.49

Correlation Coefficient

CPE Technology  Bank Islam

Very good diversification

The 3 months correlation between CPE and Bank is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CPE Technology Berhad and Bank Islam Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Islam Malaysia 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 Bank Islam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Islam Malaysia has no effect on the direction of CPE Technology i.e., CPE Technology and Bank Islam go up and down completely randomly.

Pair Corralation between CPE Technology and Bank Islam

Assuming the 90 days trading horizon CPE Technology Berhad is expected to under-perform the Bank Islam. In addition to that, CPE Technology is 3.13 times more volatile than Bank Islam Malaysia. It trades about -0.16 of its total potential returns per unit of risk. Bank Islam Malaysia is currently generating about 0.05 per unit of volatility. If you would invest  244.00  in Bank Islam Malaysia on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Bank Islam Malaysia or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

CPE Technology Berhad  vs.  Bank Islam Malaysia

CPE Technology Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPE Technology Berhad 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Islam Malaysia

Risk-Adjusted Performance

Insignificant

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

Pair Trading with CPE Technology and Bank Islam

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

The idea behind CPE Technology Berhad and Bank Islam Malaysia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.