Correlation Between Shangri La and Sungei Bagan

Can any of the company-specific risk be diversified away by investing in both Shangri La and Sungei Bagan 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 Shangri La and Sungei Bagan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shangri La Hotels and Sungei Bagan Rubber, you can compare the effects of market volatilities on Shangri La and Sungei Bagan 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 Shangri La with a short position of Sungei Bagan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shangri La and Sungei Bagan.

Diversification Opportunities for Shangri La and Sungei Bagan

-0.14

Correlation Coefficient

Shangri La  Sungei Bagan

Good diversification

The 3 months correlation between Shangri and Sungei is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotels and Sungei Bagan Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungei Bagan Rubber and Shangri La 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 Shangri La Hotels are associated (or correlated) with Sungei Bagan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungei Bagan Rubber has no effect on the direction of Shangri La i.e., Shangri La and Sungei Bagan go up and down completely randomly.

Pair Corralation between Shangri La and Sungei Bagan

Assuming the 90 days trading horizon Shangri La is expected to generate 7.37 times less return on investment than Sungei Bagan. In addition to that, Shangri La is 1.06 times more volatile than Sungei Bagan Rubber. It trades about 0.03 of its total potential returns per unit of risk. Sungei Bagan Rubber is currently generating about 0.24 per unit of volatility. If you would invest  528.00  in Sungei Bagan Rubber on October 22, 2024 and sell it today you would earn a total of  23.00  from holding Sungei Bagan Rubber or generate 4.36% return on investment over 90 days.

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

Shangri La Hotels  vs.  Sungei Bagan Rubber

Shangri La Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shangri La Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shangri La is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sungei Bagan Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungei Bagan Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Shangri La and Sungei Bagan

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

The idea behind Shangri La Hotels and Sungei Bagan Rubber 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.