Correlation Between Petronas Gas and FARM FRESH

Can any of the company-specific risk be diversified away by investing in both Petronas Gas and FARM FRESH 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 Petronas Gas and FARM FRESH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petronas Gas Bhd and FARM FRESH BERHAD, you can compare the effects of market volatilities on Petronas Gas and FARM FRESH 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 Petronas Gas with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petronas Gas and FARM FRESH.

Diversification Opportunities for Petronas Gas and FARM FRESH

0.28

Correlation Coefficient

Petronas Gas  FARM FRESH

Modest diversification

The 3 months correlation between Petronas and FARM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Gas Bhd and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and Petronas Gas 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 Petronas Gas Bhd are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Petronas Gas i.e., Petronas Gas and FARM FRESH go up and down completely randomly.

Pair Corralation between Petronas Gas and FARM FRESH

Assuming the 90 days trading horizon Petronas Gas Bhd is expected to generate 0.58 times more return on investment than FARM FRESH. However, Petronas Gas Bhd is 1.71 times less risky than FARM FRESH. It trades about -0.01 of its potential returns per unit of risk. FARM FRESH BERHAD is currently generating about -0.07 per unit of risk. If you would invest  1,762  in Petronas Gas Bhd on November 28, 2024 and sell it today you would lose (12.00) from holding Petronas Gas Bhd or give up 0.68% of portfolio value over 90 days.

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

Petronas Gas Bhd  vs.  FARM FRESH BERHAD

Petronas Gas Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petronas Gas Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Petronas Gas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FARM FRESH BERHAD

Risk-Adjusted Performance

Very Weak

Over the last 90 days FARM FRESH BERHAD 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 Petronas Gas and FARM FRESH

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

The idea behind Petronas Gas Bhd and FARM FRESH BERHAD 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.