Correlation Between Systech Bhd and HeiTech Padu

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

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

Diversification Opportunities for Systech Bhd and HeiTech Padu

-0.22

Correlation Coefficient

Systech Bhd  HeiTech Padu

Very good diversification

The 3 months correlation between Systech and HeiTech is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Systech Bhd and HeiTech Padu Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeiTech Padu Bhd and Systech Bhd 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 Systech Bhd are associated (or correlated) with HeiTech Padu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeiTech Padu Bhd has no effect on the direction of Systech Bhd i.e., Systech Bhd and HeiTech Padu go up and down completely randomly.

Pair Corralation between Systech Bhd and HeiTech Padu

Assuming the 90 days trading horizon Systech Bhd is expected to under-perform the HeiTech Padu. But the stock apears to be less risky and, when comparing its historical volatility, Systech Bhd is 1.45 times less risky than HeiTech Padu. The stock trades about -0.02 of its potential returns per unit of risk. The HeiTech Padu Bhd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  299.00  in HeiTech Padu Bhd on September 14, 2024 and sell it today you would earn a total of  15.00  from holding HeiTech Padu Bhd or generate 5.02% return on investment over 90 days.

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

Systech Bhd  vs.  HeiTech Padu Bhd

Systech Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Systech Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Systech Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

HeiTech Padu Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HeiTech Padu Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, HeiTech Padu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Systech Bhd and HeiTech Padu

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

The idea behind Systech Bhd and HeiTech Padu 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.