Correlation Between Sapura Industrial and Pesona Metro

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

Diversification Opportunities for Sapura Industrial and Pesona Metro

0.66

Correlation Coefficient

Sapura Industrial  Pesona Metro

Poor diversification

The 3 months correlation between Sapura and Pesona is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sapura Industrial Bhd and Pesona Metro Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pesona Metro Holdings 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 Pesona Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pesona Metro Holdings has no effect on the direction of Sapura Industrial i.e., Sapura Industrial and Pesona Metro go up and down completely randomly.

Pair Corralation between Sapura Industrial and Pesona Metro

Assuming the 90 days trading horizon Sapura Industrial is expected to generate 1.78 times less return on investment than Pesona Metro. But when comparing it to its historical volatility, Sapura Industrial Bhd is 1.43 times less risky than Pesona Metro. It trades about 0.31 of its potential returns per unit of risk. Pesona Metro Holdings is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Pesona Metro Holdings on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Pesona Metro Holdings or generate 20.83% return on investment over 90 days.

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

Sapura Industrial Bhd  vs.  Pesona Metro Holdings

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.

Pesona Metro Holdings

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Sapura Industrial and Pesona Metro

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

The idea behind Sapura Industrial Bhd and Pesona Metro Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.