Correlation Between Kawan Food and PIE Industrial

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

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

Diversification Opportunities for Kawan Food and PIE Industrial

-0.1

Correlation Coefficient

Kawan Food  PIE Industrial

Good diversification

The 3 months correlation between Kawan and PIE is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Kawan Food Bhd and PIE Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIE Industrial Bhd and Kawan Food 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 Kawan Food Bhd are associated (or correlated) with PIE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIE Industrial Bhd has no effect on the direction of Kawan Food i.e., Kawan Food and PIE Industrial go up and down completely randomly.

Pair Corralation between Kawan Food and PIE Industrial

Assuming the 90 days trading horizon Kawan Food Bhd is expected to under-perform the PIE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Kawan Food Bhd is 2.19 times less risky than PIE Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The PIE Industrial Bhd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  526.00  in PIE Industrial Bhd on October 26, 2024 and sell it today you would lose (18.00) from holding PIE Industrial Bhd or give up 3.42% of portfolio value over 90 days.

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

Kawan Food Bhd  vs.  PIE Industrial Bhd

Kawan Food Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

PIE Industrial Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kawan Food Bhd and PIE 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 Global Correlations module to find global opportunities by holding instruments from different markets.