Correlation Between Kuala Lumpur and QL Resources

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

Diversification Opportunities for Kuala Lumpur and QL Resources

0.64

Correlation Coefficient

Kuala Lumpur  QL Resources

Poor diversification

The 3 months correlation between Kuala and 7084 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kuala Lumpur Kepong and QL Resources Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QL Resources 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 QL Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QL Resources Bhd has no effect on the direction of Kuala Lumpur i.e., Kuala Lumpur and QL Resources go up and down completely randomly.

Pair Corralation between Kuala Lumpur and QL Resources

Assuming the 90 days trading horizon Kuala Lumpur Kepong is expected to generate 1.6 times more return on investment than QL Resources. However, Kuala Lumpur is 1.6 times more volatile than QL Resources Bhd. It trades about 0.05 of its potential returns per unit of risk. QL Resources Bhd is currently generating about 0.07 per unit of risk. If you would invest  2,072  in Kuala Lumpur Kepong on September 24, 2024 and sell it today you would earn a total of  78.00  from holding Kuala Lumpur Kepong or generate 3.76% return on investment over 90 days.

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

Kuala Lumpur Kepong  vs.  QL Resources 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.

QL Resources Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QL Resources Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, QL 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 Kuala Lumpur and QL Resources

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

The idea behind Kuala Lumpur Kepong and QL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.