Correlation Between Pentamaster Bhd and Sime Darby

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

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

Diversification Opportunities for Pentamaster Bhd and Sime Darby

-0.23

Correlation Coefficient

Pentamaster Bhd  Sime Darby

Very good diversification

The 3 months correlation between Pentamaster and Sime is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pentamaster Bhd and Sime Darby Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Bhd and Pentamaster Bhd 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 Pentamaster Bhd are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Bhd has no effect on the direction of Pentamaster Bhd i.e., Pentamaster Bhd and Sime Darby go up and down completely randomly.

Pair Corralation between Pentamaster Bhd and Sime Darby

Assuming the 90 days trading horizon Pentamaster Bhd is expected to generate 2.43 times more return on investment than Sime Darby. However, Pentamaster Bhd is 2.43 times more volatile than Sime Darby Bhd. It trades about 0.26 of its potential returns per unit of risk. Sime Darby Bhd is currently generating about 0.03 per unit of risk. If you would invest  344.00  in Pentamaster Bhd on September 28, 2024 and sell it today you would earn a total of  79.00  from holding Pentamaster Bhd or generate 22.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Pentamaster Bhd  vs.  Sime Darby Bhd

Pentamaster Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentamaster Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pentamaster Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby 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 Pentamaster Bhd and Sime Darby

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

The idea behind Pentamaster Bhd and Sime Darby 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.