Correlation Between Power Assets and KeppelLimited

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

By analyzing existing cross correlation between Power Assets Holdings and Keppel Limited, you can compare the effects of market volatilities on Power Assets and KeppelLimited 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 Power Assets with a short position of KeppelLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Assets and KeppelLimited.

Diversification Opportunities for Power Assets and KeppelLimited

-0.17

Correlation Coefficient

Power Assets  KeppelLimited

Good diversification

The 3 months correlation between Power and KeppelLimited is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel Limited and Power Assets 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 Power Assets Holdings are associated (or correlated) with KeppelLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of Power Assets i.e., Power Assets and KeppelLimited go up and down completely randomly.

Pair Corralation between Power Assets and KeppelLimited

Assuming the 90 days horizon Power Assets Holdings is expected to under-perform the KeppelLimited. But the pink sheet apears to be less risky and, when comparing its historical volatility, Power Assets Holdings is 1.17 times less risky than KeppelLimited. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Keppel Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Keppel Limited on December 20, 2024 and sell it today you would earn a total of  58.00  from holding Keppel Limited or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Power Assets Holdings  vs.  Keppel Limited

Power Assets Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Power Assets is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Keppel Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, KeppelLimited may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Power Assets and KeppelLimited

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

The idea behind Power Assets Holdings and Keppel Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.