Correlation Between Royal Plus and Chin Huay

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

By analyzing existing cross correlation between Royal Plus PCL and Chin Huay PCL, you can compare the effects of market volatilities on Royal Plus and Chin Huay 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 Royal Plus with a short position of Chin Huay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Plus and Chin Huay.

Diversification Opportunities for Royal Plus and Chin Huay

0.59

Correlation Coefficient

Royal Plus  Chin Huay

Very weak diversification

The 3 months correlation between Royal and Chin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Royal Plus PCL and Chin Huay PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chin Huay PCL and Royal Plus 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 Royal Plus PCL are associated (or correlated) with Chin Huay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chin Huay PCL has no effect on the direction of Royal Plus i.e., Royal Plus and Chin Huay go up and down completely randomly.

Pair Corralation between Royal Plus and Chin Huay

Assuming the 90 days trading horizon Royal Plus PCL is expected to generate 1.83 times more return on investment than Chin Huay. However, Royal Plus is 1.83 times more volatile than Chin Huay PCL. It trades about -0.01 of its potential returns per unit of risk. Chin Huay PCL is currently generating about -0.03 per unit of risk. If you would invest  604.00  in Royal Plus PCL on September 12, 2024 and sell it today you would lose (99.00) from holding Royal Plus PCL or give up 16.39% of portfolio value over 90 days.

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

Royal Plus PCL  vs.  Chin Huay PCL

Royal Plus PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Plus PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Chin Huay PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chin Huay PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Royal Plus and Chin Huay

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

The idea behind Royal Plus PCL and Chin Huay PCL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..