Correlation Between TechnoDex Bhd and Telekom Malaysia

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

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

Diversification Opportunities for TechnoDex Bhd and Telekom Malaysia

-0.55

Correlation Coefficient

TechnoDex Bhd  Telekom Malaysia

Excellent diversification

The 3 months correlation between TechnoDex and Telekom is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding TechnoDex Bhd and Telekom Malaysia Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telekom Malaysia Bhd and TechnoDex 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 TechnoDex Bhd are associated (or correlated) with Telekom Malaysia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telekom Malaysia Bhd has no effect on the direction of TechnoDex Bhd i.e., TechnoDex Bhd and Telekom Malaysia go up and down completely randomly.

Pair Corralation between TechnoDex Bhd and Telekom Malaysia

Assuming the 90 days trading horizon TechnoDex Bhd is expected to generate 6.39 times more return on investment than Telekom Malaysia. However, TechnoDex Bhd is 6.39 times more volatile than Telekom Malaysia Bhd. It trades about 0.03 of its potential returns per unit of risk. Telekom Malaysia Bhd is currently generating about -0.02 per unit of risk. If you would invest  5.50  in TechnoDex Bhd on September 14, 2024 and sell it today you would earn a total of  0.00  from holding TechnoDex Bhd or generate 0.0% return on investment over 90 days.

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

TechnoDex Bhd  vs.  Telekom Malaysia Bhd

TechnoDex Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TechnoDex Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TechnoDex Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telekom Malaysia Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TechnoDex Bhd and Telekom Malaysia

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

The idea behind TechnoDex Bhd and Telekom Malaysia 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.