Correlation Between Kuala Lumpur and Heineken Bhd

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

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

Diversification Opportunities for Kuala Lumpur and Heineken Bhd

0.16

Correlation Coefficient

Kuala Lumpur  Heineken Bhd

Average diversification

The 3 months correlation between Kuala and Heineken is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kuala Lumpur Kepong and Heineken Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Bhd and Kuala Lumpur 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 Kuala Lumpur Kepong are associated (or correlated) with Heineken Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Bhd has no effect on the direction of Kuala Lumpur i.e., Kuala Lumpur and Heineken Bhd go up and down completely randomly.

Pair Corralation between Kuala Lumpur and Heineken Bhd

Assuming the 90 days trading horizon Kuala Lumpur is expected to generate 2.32 times less return on investment than Heineken Bhd. But when comparing it to its historical volatility, Kuala Lumpur Kepong is 1.01 times less risky than Heineken Bhd. It trades about 0.05 of its potential returns per unit of risk. Heineken Bhd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,196  in Heineken Bhd on September 24, 2024 and sell it today you would earn a total of  214.00  from holding Heineken Bhd or generate 9.74% return on investment over 90 days.

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

Kuala Lumpur Kepong  vs.  Heineken Bhd

Kuala Lumpur Kepong

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kuala Lumpur Kepong are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kuala Lumpur is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Heineken Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Heineken Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kuala Lumpur and Heineken Bhd

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

The idea behind Kuala Lumpur Kepong and Heineken 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.