Correlation Between Public Bank and Omesti Bhd

Can any of the company-specific risk be diversified away by investing in both Public Bank and Omesti 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 Public Bank and Omesti Bhd 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 Omesti Bhd, you can compare the effects of market volatilities on Public Bank and Omesti 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 Public Bank with a short position of Omesti Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Bank and Omesti Bhd.

Diversification Opportunities for Public Bank and Omesti Bhd

0.52

Correlation Coefficient

Public Bank  Omesti Bhd

Very weak diversification

The 3 months correlation between Public and Omesti is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and Omesti Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omesti 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 Omesti Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omesti Bhd has no effect on the direction of Public Bank i.e., Public Bank and Omesti Bhd go up and down completely randomly.

Pair Corralation between Public Bank and Omesti Bhd

Assuming the 90 days trading horizon Public Bank Bhd is expected to under-perform the Omesti Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Public Bank Bhd is 7.71 times less risky than Omesti Bhd. The stock trades about -0.06 of its potential returns per unit of risk. The Omesti Bhd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Omesti Bhd on September 23, 2024 and sell it today you would earn a total of  2.00  from holding Omesti Bhd or generate 14.29% 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.  Omesti 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.

Omesti Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omesti Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Omesti Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Public Bank and Omesti Bhd

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

The idea behind Public Bank Bhd and Omesti 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.