Correlation Between Hong Leong and Genting Plantations

Can any of the company-specific risk be diversified away by investing in both Hong Leong and Genting Plantations 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 Hong Leong and Genting Plantations into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Leong Bank and Genting Plantations Bhd, you can compare the effects of market volatilities on Hong Leong and Genting Plantations 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 Hong Leong with a short position of Genting Plantations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Genting Plantations.

Diversification Opportunities for Hong Leong and Genting Plantations

-0.3

Correlation Coefficient

Hong Leong  Genting Plantations

Very good diversification

The 3 months correlation between Hong and Genting is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Genting Plantations Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genting Plantations Bhd and Hong Leong 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 Hong Leong Bank are associated (or correlated) with Genting Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genting Plantations Bhd has no effect on the direction of Hong Leong i.e., Hong Leong and Genting Plantations go up and down completely randomly.

Pair Corralation between Hong Leong and Genting Plantations

Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.63 times more return on investment than Genting Plantations. However, Hong Leong Bank is 1.58 times less risky than Genting Plantations. It trades about 0.01 of its potential returns per unit of risk. Genting Plantations Bhd is currently generating about -0.11 per unit of risk. If you would invest  2,002  in Hong Leong Bank on December 25, 2024 and sell it today you would earn a total of  10.00  from holding Hong Leong Bank or generate 0.5% return on investment over 90 days.

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

Hong Leong Bank  vs.  Genting Plantations Bhd

Hong Leong Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Leong Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Hong Leong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Genting Plantations Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genting Plantations Bhd 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 Hong Leong and Genting Plantations

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

The idea behind Hong Leong Bank and Genting Plantations 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..