Correlation Between Malayan Banking and Homeritz Bhd

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

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

Diversification Opportunities for Malayan Banking and Homeritz Bhd

-0.47

Correlation Coefficient

Malayan Banking  Homeritz Bhd

Very good diversification

The 3 months correlation between Malayan and Homeritz is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Homeritz Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeritz Bhd and Malayan Banking 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 Malayan Banking Bhd are associated (or correlated) with Homeritz Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeritz Bhd has no effect on the direction of Malayan Banking i.e., Malayan Banking and Homeritz Bhd go up and down completely randomly.

Pair Corralation between Malayan Banking and Homeritz Bhd

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to under-perform the Homeritz Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Malayan Banking Bhd is 3.89 times less risky than Homeritz Bhd. The stock trades about -0.09 of its potential returns per unit of risk. The Homeritz Bhd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Homeritz Bhd on September 27, 2024 and sell it today you would earn a total of  6.00  from holding Homeritz Bhd or generate 11.32% return on investment over 90 days.

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

Malayan Banking Bhd  vs.  Homeritz Bhd

Malayan Banking Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Homeritz Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Homeritz Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Malayan Banking and Homeritz Bhd

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

The idea behind Malayan Banking Bhd and Homeritz 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 Transaction History module to view history of all your transactions and understand their impact on performance.