Correlation Between Tenaga Nasional and Teo Seng

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

Diversification Opportunities for Tenaga Nasional and Teo Seng

0.01

Correlation Coefficient

Tenaga Nasional  Teo Seng

Significant diversification

The 3 months correlation between Tenaga and Teo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Teo Seng Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teo Seng Capital 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 Teo Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teo Seng Capital has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Teo Seng go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Teo Seng

Assuming the 90 days trading horizon Tenaga Nasional is expected to generate 2.4 times less return on investment than Teo Seng. But when comparing it to its historical volatility, Tenaga Nasional Bhd is 2.43 times less risky than Teo Seng. It trades about 0.11 of its potential returns per unit of risk. Teo Seng Capital is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Teo Seng Capital on October 4, 2024 and sell it today you would earn a total of  77.00  from holding Teo Seng Capital or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Tenaga Nasional Bhd  vs.  Teo Seng Capital

Tenaga Nasional Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaga Nasional Bhd are ranked lower than 5 (%) 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.

Teo Seng Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Tenaga Nasional Bhd and Teo Seng Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.