Correlation Between KPJ Healthcare and Tex Cycle

Can any of the company-specific risk be diversified away by investing in both KPJ Healthcare and Tex Cycle 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 KPJ Healthcare and Tex Cycle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KPJ Healthcare Bhd and Tex Cycle Technology, you can compare the effects of market volatilities on KPJ Healthcare and Tex Cycle 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 KPJ Healthcare with a short position of Tex Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPJ Healthcare and Tex Cycle.

Diversification Opportunities for KPJ Healthcare and Tex Cycle

0.38

Correlation Coefficient

KPJ Healthcare  Tex Cycle

Weak diversification

The 3 months correlation between KPJ and Tex is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Tex Cycle Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Cycle Technology and KPJ Healthcare 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 KPJ Healthcare Bhd are associated (or correlated) with Tex Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Cycle Technology has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Tex Cycle go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Tex Cycle

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to generate 0.66 times more return on investment than Tex Cycle. However, KPJ Healthcare Bhd is 1.53 times less risky than Tex Cycle. It trades about 0.13 of its potential returns per unit of risk. Tex Cycle Technology is currently generating about 0.08 per unit of risk. If you would invest  148.00  in KPJ Healthcare Bhd on October 9, 2024 and sell it today you would earn a total of  89.00  from holding KPJ Healthcare Bhd or generate 60.14% return on investment over 90 days.

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

KPJ Healthcare Bhd  vs.  Tex Cycle Technology

KPJ Healthcare Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, KPJ Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tex Cycle Technology

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Tex Cycle Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tex Cycle 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 KPJ Healthcare and Tex Cycle

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

The idea behind KPJ Healthcare Bhd and Tex Cycle Technology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.