Correlation Between Malayan Banking and Shangri La

Can any of the company-specific risk be diversified away by investing in both Malayan Banking and Shangri La 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 Shangri La 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 Shangri La Hotels, you can compare the effects of market volatilities on Malayan Banking and Shangri La 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 Shangri La. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malayan Banking and Shangri La.

Diversification Opportunities for Malayan Banking and Shangri La

0.06

Correlation Coefficient

Malayan Banking  Shangri La

Significant diversification

The 3 months correlation between Malayan and Shangri is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Malayan Banking Bhd and Shangri La Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shangri La Hotels 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 Shangri La. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shangri La Hotels has no effect on the direction of Malayan Banking i.e., Malayan Banking and Shangri La go up and down completely randomly.

Pair Corralation between Malayan Banking and Shangri La

Assuming the 90 days trading horizon Malayan Banking Bhd is expected to under-perform the Shangri La. But the stock apears to be less risky and, when comparing its historical volatility, Malayan Banking Bhd is 1.58 times less risky than Shangri La. The stock trades about -0.12 of its potential returns per unit of risk. The Shangri La Hotels is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  201.00  in Shangri La Hotels on September 15, 2024 and sell it today you would lose (1.00) from holding Shangri La Hotels or give up 0.5% of portfolio value over 90 days.

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

Malayan Banking Bhd  vs.  Shangri La Hotels

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.

Shangri La Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shangri La Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shangri La 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 Malayan Banking and Shangri La

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

The idea behind Malayan Banking Bhd and Shangri La Hotels 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.