Correlation Between KL Technology and Genting Bhd

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

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

Diversification Opportunities for KL Technology and Genting Bhd

0.77

Correlation Coefficient

KL Technology  Genting Bhd

Poor diversification

The 3 months correlation between KLTE and Genting is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding KL Technology and Genting Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genting Bhd and KL 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 KL Technology are associated (or correlated) with Genting Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genting Bhd has no effect on the direction of KL Technology i.e., KL Technology and Genting Bhd go up and down completely randomly.

Pair Corralation between KL Technology and Genting Bhd

Assuming the 90 days trading horizon KL Technology is expected to under-perform the Genting Bhd. But the index apears to be less risky and, when comparing its historical volatility, KL Technology is 1.33 times less risky than Genting Bhd. The index trades about -0.24 of its potential returns per unit of risk. The Genting Bhd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Genting Bhd on December 24, 2024 and sell it today you would lose (29.00) from holding Genting Bhd or give up 8.03% of portfolio value over 90 days.

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

KL Technology  vs.  Genting Bhd

Pair Trading with KL Technology and Genting Bhd

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

The idea behind KL Technology and Genting 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.