Correlation Between Sapura Industrial and ECS ICT

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

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

Diversification Opportunities for Sapura Industrial and ECS ICT

0.57

Correlation Coefficient

Sapura Industrial  ECS ICT

Very weak diversification

The 3 months correlation between Sapura and ECS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sapura Industrial Bhd and ECS ICT Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECS ICT Bhd and Sapura Industrial 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 Sapura Industrial Bhd are associated (or correlated) with ECS ICT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECS ICT Bhd has no effect on the direction of Sapura Industrial i.e., Sapura Industrial and ECS ICT go up and down completely randomly.

Pair Corralation between Sapura Industrial and ECS ICT

Assuming the 90 days trading horizon Sapura Industrial is expected to generate 2.9 times less return on investment than ECS ICT. But when comparing it to its historical volatility, Sapura Industrial Bhd is 1.28 times less risky than ECS ICT. It trades about 0.1 of its potential returns per unit of risk. ECS ICT Bhd is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  296.00  in ECS ICT Bhd on October 9, 2024 and sell it today you would earn a total of  112.00  from holding ECS ICT Bhd or generate 37.84% return on investment over 90 days.

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

Sapura Industrial Bhd  vs.  ECS ICT Bhd

Sapura Industrial Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sapura Industrial Bhd are ranked lower than 7 (%) 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 February 2025.

ECS ICT Bhd

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ECS ICT Bhd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ECS ICT disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapura Industrial and ECS ICT

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

The idea behind Sapura Industrial Bhd and ECS ICT 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.