Correlation Between Public Bank and XL Holdings

Can any of the company-specific risk be diversified away by investing in both Public Bank and XL Holdings 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 Public Bank and XL Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Public Bank and XL Holdings

0.56

Correlation Coefficient

Public Bank  XL Holdings

Very weak diversification

The 3 months correlation between Public and 7121 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and XL Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XL Holdings Bhd and Public Bank 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 Public Bank Bhd are associated (or correlated) with XL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XL Holdings Bhd has no effect on the direction of Public Bank i.e., Public Bank and XL Holdings go up and down completely randomly.

Pair Corralation between Public Bank and XL Holdings

Assuming the 90 days trading horizon Public Bank Bhd is expected to generate 0.55 times more return on investment than XL Holdings. However, Public Bank Bhd is 1.83 times less risky than XL Holdings. It trades about 0.03 of its potential returns per unit of risk. XL Holdings Bhd is currently generating about 0.0 per unit of risk. If you would invest  396.00  in Public Bank Bhd on September 24, 2024 and sell it today you would earn a total of  50.00  from holding Public Bank Bhd or generate 12.63% return on investment over 90 days.

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

Public Bank Bhd  vs.  XL Holdings Bhd

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

XL Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, XL Holdings 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 Public Bank and XL Holdings

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

The idea behind Public Bank Bhd and XL Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.