Correlation Between CB Industrial and Gamuda Bhd

Can any of the company-specific risk be diversified away by investing in both CB Industrial and Gamuda Bhd 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 CB Industrial and Gamuda Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CB Industrial Product and Gamuda Bhd, you can compare the effects of market volatilities on CB Industrial and Gamuda Bhd 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 CB Industrial with a short position of Gamuda Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and Gamuda Bhd.

Diversification Opportunities for CB Industrial and Gamuda Bhd

0.66

Correlation Coefficient

CB Industrial  Gamuda Bhd

Poor diversification

The 3 months correlation between 7076 and Gamuda is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and Gamuda Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamuda Bhd and CB Industrial 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 CB Industrial Product are associated (or correlated) with Gamuda Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamuda Bhd has no effect on the direction of CB Industrial i.e., CB Industrial and Gamuda Bhd go up and down completely randomly.

Pair Corralation between CB Industrial and Gamuda Bhd

Assuming the 90 days trading horizon CB Industrial is expected to generate 4.72 times less return on investment than Gamuda Bhd. In addition to that, CB Industrial is 1.04 times more volatile than Gamuda Bhd. It trades about 0.04 of its total potential returns per unit of risk. Gamuda Bhd is currently generating about 0.2 per unit of volatility. If you would invest  409.00  in Gamuda Bhd on October 9, 2024 and sell it today you would earn a total of  77.00  from holding Gamuda Bhd or generate 18.83% return on investment over 90 days.

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

CB Industrial Product  vs.  Gamuda Bhd

CB Industrial Product

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CB Industrial Product are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CB Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gamuda Bhd

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamuda Bhd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Gamuda Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CB Industrial and Gamuda Bhd

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

The idea behind CB Industrial Product and Gamuda 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.