Correlation Between KPJ Healthcare and Nexgram Holdings

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

Diversification Opportunities for KPJ Healthcare and Nexgram Holdings

0.19

Correlation Coefficient

KPJ Healthcare  Nexgram Holdings

Average diversification

The 3 months correlation between KPJ and Nexgram is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Nexgram Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexgram Holdings Bhd 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 Nexgram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexgram Holdings Bhd has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Nexgram Holdings go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Nexgram Holdings

Assuming the 90 days trading horizon KPJ Healthcare is expected to generate 5.13 times less return on investment than Nexgram Holdings. But when comparing it to its historical volatility, KPJ Healthcare Bhd is 11.69 times less risky than Nexgram Holdings. It trades about 0.15 of its potential returns per unit of risk. Nexgram Holdings Bhd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Nexgram Holdings Bhd on October 3, 2024 and sell it today you would lose (2.50) from holding Nexgram Holdings Bhd or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

KPJ Healthcare Bhd  vs.  Nexgram Holdings Bhd

KPJ Healthcare Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 10 (%) 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.

Nexgram Holdings Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexgram Holdings Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Nexgram Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KPJ Healthcare and Nexgram Holdings

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

The idea behind KPJ Healthcare Bhd and Nexgram Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.