Correlation Between Tenaga Nasional and Aeon Credit

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

Diversification Opportunities for Tenaga Nasional and Aeon Credit

0.41

Correlation Coefficient

Tenaga Nasional  Aeon Credit

Very weak diversification

The 3 months correlation between Tenaga and Aeon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service 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 Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Aeon Credit go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Aeon Credit

Assuming the 90 days trading horizon Tenaga Nasional Bhd is expected to under-perform the Aeon Credit. In addition to that, Tenaga Nasional is 1.06 times more volatile than Aeon Credit Service. It trades about -0.04 of its total potential returns per unit of risk. Aeon Credit Service is currently generating about 0.02 per unit of volatility. If you would invest  621.00  in Aeon Credit Service on December 24, 2024 and sell it today you would earn a total of  6.00  from holding Aeon Credit Service or generate 0.97% return on investment over 90 days.

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

Tenaga Nasional Bhd  vs.  Aeon Credit Service

Tenaga Nasional Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tenaga Nasional Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Aeon Credit Service

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aeon Credit Service are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Aeon Credit 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 Tenaga Nasional and Aeon Credit

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

The idea behind Tenaga Nasional Bhd and Aeon Credit Service 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.