Correlation Between Tenaga Nasional and Farm Price

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

Diversification Opportunities for Tenaga Nasional and Farm Price

0.25

Correlation Coefficient

Tenaga Nasional  Farm Price

Modest diversification

The 3 months correlation between Tenaga and Farm is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Farm Price Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Price Holdings 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 Farm Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Price Holdings has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Farm Price go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Farm Price

Assuming the 90 days trading horizon Tenaga Nasional Bhd is expected to generate 0.38 times more return on investment than Farm Price. However, Tenaga Nasional Bhd is 2.65 times less risky than Farm Price. It trades about 0.1 of its potential returns per unit of risk. Farm Price Holdings is currently generating about 0.0 per unit of risk. If you would invest  854.00  in Tenaga Nasional Bhd on November 30, 2024 and sell it today you would earn a total of  506.00  from holding Tenaga Nasional Bhd or generate 59.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	40.82%
Values	Daily Returns

Tenaga Nasional Bhd  vs.  Farm Price Holdings

Tenaga Nasional Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaga Nasional Bhd are ranked lower than 1 (%) 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.

Farm Price Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farm Price Holdings 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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tenaga Nasional and Farm Price

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

The idea behind Tenaga Nasional Bhd and Farm Price Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.