Correlation Between PMB Technology and Daya Materials

Can any of the company-specific risk be diversified away by investing in both PMB Technology and Daya Materials 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 PMB Technology and Daya Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for PMB Technology and Daya Materials

0.24

Correlation Coefficient

PMB Technology  Daya Materials

Modest diversification

The 3 months correlation between PMB and Daya is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PMB Technology Bhd and Daya Materials Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daya Materials Bhd and PMB Technology 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 PMB Technology Bhd are associated (or correlated) with Daya Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daya Materials Bhd has no effect on the direction of PMB Technology i.e., PMB Technology and Daya Materials go up and down completely randomly.

Pair Corralation between PMB Technology and Daya Materials

Assuming the 90 days trading horizon PMB Technology Bhd is expected to under-perform the Daya Materials. In addition to that, PMB Technology is 1.04 times more volatile than Daya Materials Bhd. It trades about -0.11 of its total potential returns per unit of risk. Daya Materials Bhd is currently generating about -0.11 per unit of volatility. If you would invest  12.00  in Daya Materials Bhd on September 3, 2024 and sell it today you would lose (1.00) from holding Daya Materials Bhd or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

PMB Technology Bhd  vs.  Daya Materials Bhd

PMB Technology Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PMB Technology Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Daya Materials Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind PMB Technology Bhd and Daya Materials 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.