Correlation Between CPE Technology and Scientex Packaging

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

Diversification Opportunities for CPE Technology and Scientex Packaging

-0.6

Correlation Coefficient

CPE Technology  Scientex Packaging

Excellent diversification

The 3 months correlation between CPE and Scientex is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CPE Technology Berhad and Scientex Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientex Packaging 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 Scientex Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientex Packaging has no effect on the direction of CPE Technology i.e., CPE Technology and Scientex Packaging go up and down completely randomly.

Pair Corralation between CPE Technology and Scientex Packaging

Assuming the 90 days trading horizon CPE Technology Berhad is expected to under-perform the Scientex Packaging. In addition to that, CPE Technology is 2.66 times more volatile than Scientex Packaging. It trades about -0.04 of its total potential returns per unit of risk. Scientex Packaging is currently generating about -0.04 per unit of volatility. If you would invest  192.00  in Scientex Packaging on September 13, 2024 and sell it today you would lose (6.00) from holding Scientex Packaging or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CPE Technology Berhad  vs.  Scientex Packaging

CPE Technology Berhad

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Scientex Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scientex Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Scientex Packaging 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 Scientex Packaging

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

The idea behind CPE Technology Berhad and Scientex Packaging 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.