Correlation Between Tenaga Nasional and Gamuda Bhd

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

Diversification Opportunities for Tenaga Nasional and Gamuda Bhd

-0.76

Correlation Coefficient

Tenaga Nasional  Gamuda Bhd

Pay attention - limited upside

The 3 months correlation between Tenaga and Gamuda is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Gamuda Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamuda 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 Gamuda Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamuda Bhd has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Gamuda Bhd go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Gamuda Bhd

Assuming the 90 days trading horizon Tenaga Nasional Bhd is expected to under-perform the Gamuda Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Tenaga Nasional Bhd is 1.13 times less risky than Gamuda Bhd. The stock trades about -0.13 of its potential returns per unit of risk. The Gamuda Bhd is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  885.00  in Gamuda Bhd on September 18, 2024 and sell it today you would earn a total of  76.00  from holding Gamuda Bhd or generate 8.59% return on investment over 90 days.

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

Tenaga Nasional Bhd  vs.  Gamuda Bhd

Tenaga Nasional Bhd

Risk-Adjusted Performance

0 of 100

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.

Gamuda Bhd

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamuda Bhd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Gamuda Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaga Nasional and Gamuda Bhd

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

The idea behind Tenaga Nasional Bhd and Gamuda 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.