Correlation Between PMB Technology and Sapura Industrial

Can any of the company-specific risk be diversified away by investing in both PMB Technology and Sapura Industrial 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 Sapura Industrial 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 Sapura Industrial Bhd, you can compare the effects of market volatilities on PMB Technology and Sapura Industrial 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 Sapura Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PMB Technology and Sapura Industrial.

Diversification Opportunities for PMB Technology and Sapura Industrial

-0.33

Correlation Coefficient

PMB Technology  Sapura Industrial

Very good diversification

The 3 months correlation between PMB and Sapura is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PMB Technology Bhd and Sapura Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapura Industrial 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 Sapura Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapura Industrial Bhd has no effect on the direction of PMB Technology i.e., PMB Technology and Sapura Industrial go up and down completely randomly.

Pair Corralation between PMB Technology and Sapura Industrial

Assuming the 90 days trading horizon PMB Technology Bhd is expected to under-perform the Sapura Industrial. In addition to that, PMB Technology is 2.64 times more volatile than Sapura Industrial Bhd. It trades about -0.1 of its total potential returns per unit of risk. Sapura Industrial Bhd is currently generating about 0.11 per unit of volatility. If you would invest  82.00  in Sapura Industrial Bhd on September 13, 2024 and sell it today you would earn a total of  7.00  from holding Sapura Industrial Bhd or generate 8.54% return on investment over 90 days.

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

PMB Technology Bhd  vs.  Sapura Industrial 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.

Sapura Industrial Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sapura Industrial Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sapura Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PMB Technology and Sapura Industrial

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

The idea behind PMB Technology Bhd and Sapura Industrial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.