Correlation Between Tenaga Nasional and Techfast Holdings

Can any of the company-specific risk be diversified away by investing in both Tenaga Nasional and Techfast Holdings 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 Tenaga Nasional and Techfast Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tenaga Nasional Bhd and Techfast Holdings Bhd, you can compare the effects of market volatilities on Tenaga Nasional and Techfast Holdings 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 Tenaga Nasional with a short position of Techfast Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaga Nasional and Techfast Holdings.

Diversification Opportunities for Tenaga Nasional and Techfast Holdings

0.7

Correlation Coefficient

Tenaga Nasional  Techfast Holdings

Poor diversification

The 3 months correlation between Tenaga and Techfast is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Techfast Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techfast Holdings Bhd and Tenaga Nasional 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 Tenaga Nasional Bhd are associated (or correlated) with Techfast Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techfast Holdings Bhd has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Techfast Holdings go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Techfast Holdings

Assuming the 90 days trading horizon Tenaga Nasional is expected to generate 11.42 times less return on investment than Techfast Holdings. But when comparing it to its historical volatility, Tenaga Nasional Bhd is 4.11 times less risky than Techfast Holdings. It trades about 0.03 of its potential returns per unit of risk. Techfast Holdings Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Techfast Holdings Bhd on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Techfast Holdings Bhd or generate 16.67% return on investment over 90 days.

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

Tenaga Nasional Bhd  vs.  Techfast Holdings Bhd

Tenaga Nasional Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaga Nasional Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Tenaga Nasional is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Techfast Holdings Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Techfast Holdings Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Techfast Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaga Nasional and Techfast Holdings

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

The idea behind Tenaga Nasional Bhd and Techfast Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.