Correlation Between KPJ Healthcare and Alliance Financial

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

Diversification Opportunities for KPJ Healthcare and Alliance Financial

0.76

Correlation Coefficient

KPJ Healthcare  Alliance Financial

Poor diversification

The 3 months correlation between KPJ and Alliance is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial 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 Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Alliance Financial go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Alliance Financial

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to under-perform the Alliance Financial. In addition to that, KPJ Healthcare is 3.06 times more volatile than Alliance Financial Group. It trades about -0.07 of its total potential returns per unit of risk. Alliance Financial Group is currently generating about 0.08 per unit of volatility. If you would invest  479.00  in Alliance Financial Group on September 29, 2024 and sell it today you would earn a total of  7.00  from holding Alliance Financial Group or generate 1.46% return on investment over 90 days.

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

KPJ Healthcare Bhd  vs.  Alliance Financial Group

KPJ Healthcare Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 8 (%) 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.

Alliance Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KPJ Healthcare and Alliance Financial

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

The idea behind KPJ Healthcare Bhd and Alliance Financial Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.