Correlation Between XL Holdings and Public Bank

Can any of the company-specific risk be diversified away by investing in both XL Holdings and Public Bank 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 XL Holdings and Public Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for XL Holdings and Public Bank

0.46

Correlation Coefficient

XL Holdings  Public Bank

Very weak diversification

The 3 months correlation between 7121 and Public is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding XL Holdings Bhd and Public Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Bank Bhd and XL Holdings 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 XL Holdings Bhd are associated (or correlated) with Public Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Bank Bhd has no effect on the direction of XL Holdings i.e., XL Holdings and Public Bank go up and down completely randomly.

Pair Corralation between XL Holdings and Public Bank

Assuming the 90 days trading horizon XL Holdings is expected to generate 1.17 times less return on investment than Public Bank. But when comparing it to its historical volatility, XL Holdings Bhd is 1.92 times less risky than Public Bank. It trades about 0.21 of its potential returns per unit of risk. Public Bank Bhd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Public Bank Bhd on September 25, 2024 and sell it today you would earn a total of  10.00  from holding Public Bank Bhd or generate 2.25% return on investment over 90 days.

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

XL Holdings Bhd  vs.  Public Bank Bhd

XL Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with XL Holdings and Public Bank

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

The idea behind XL Holdings Bhd and Public Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.