Correlation Between IOI Bhd and Minetech Resources

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

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

Diversification Opportunities for IOI Bhd and Minetech Resources

0.37

Correlation Coefficient

IOI Bhd  Minetech Resources

Weak diversification

The 3 months correlation between IOI and Minetech is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding IOI Bhd and Minetech Resources Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minetech Resources Bhd and IOI 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 IOI Bhd are associated (or correlated) with Minetech Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minetech Resources Bhd has no effect on the direction of IOI Bhd i.e., IOI Bhd and Minetech Resources go up and down completely randomly.

Pair Corralation between IOI Bhd and Minetech Resources

Assuming the 90 days trading horizon IOI Bhd is expected to generate 0.23 times more return on investment than Minetech Resources. However, IOI Bhd is 4.36 times less risky than Minetech Resources. It trades about 0.03 of its potential returns per unit of risk. Minetech Resources Bhd is currently generating about 0.0 per unit of risk. If you would invest  380.00  in IOI Bhd on September 12, 2024 and sell it today you would earn a total of  6.00  from holding IOI Bhd or generate 1.58% return on investment over 90 days.

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

IOI Bhd  vs.  Minetech Resources Bhd

IOI Bhd

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IOI Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, IOI Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Minetech Resources Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind IOI Bhd and Minetech Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.