Correlation Between KPJ Healthcare and ES Ceramics

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

Diversification Opportunities for KPJ Healthcare and ES Ceramics

-0.47

Correlation Coefficient

KPJ Healthcare  ES Ceramics

Very good diversification

The 3 months correlation between KPJ and 0100 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics 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 ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and ES Ceramics go up and down completely randomly.

Pair Corralation between KPJ Healthcare and ES Ceramics

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to generate 0.37 times more return on investment than ES Ceramics. However, KPJ Healthcare Bhd is 2.7 times less risky than ES Ceramics. It trades about 0.29 of its potential returns per unit of risk. ES Ceramics Technology is currently generating about -0.03 per unit of risk. If you would invest  192.00  in KPJ Healthcare Bhd on August 31, 2024 and sell it today you would earn a total of  58.00  from holding KPJ Healthcare Bhd or generate 30.21% return on investment over 90 days.

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

KPJ Healthcare Bhd  vs.  ES Ceramics Technology

KPJ Healthcare Bhd

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 22 (%) 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.

ES Ceramics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ES Ceramics Technology 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 KPJ Healthcare and ES Ceramics

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

The idea behind KPJ Healthcare Bhd and ES Ceramics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.