Correlation Between Keck Seng and CB Industrial

Can any of the company-specific risk be diversified away by investing in both Keck Seng and CB Industrial 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 Keck Seng and CB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keck Seng Malaysia and CB Industrial Product, you can compare the effects of market volatilities on Keck Seng and CB Industrial 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 Keck Seng with a short position of CB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keck Seng and CB Industrial.

Diversification Opportunities for Keck Seng and CB Industrial

-0.43

Correlation Coefficient

Keck Seng  CB Industrial

Very good diversification

The 3 months correlation between Keck and 7076 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Keck Seng Malaysia and CB Industrial Product in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Industrial Product and Keck Seng 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 Keck Seng Malaysia are associated (or correlated) with CB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Industrial Product has no effect on the direction of Keck Seng i.e., Keck Seng and CB Industrial go up and down completely randomly.

Pair Corralation between Keck Seng and CB Industrial

Assuming the 90 days trading horizon Keck Seng Malaysia is expected to under-perform the CB Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Keck Seng Malaysia is 2.33 times less risky than CB Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The CB Industrial Product is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  130.00  in CB Industrial Product on September 30, 2024 and sell it today you would earn a total of  6.00  from holding CB Industrial Product or generate 4.62% return on investment over 90 days.

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

Keck Seng Malaysia  vs.  CB Industrial Product

Keck Seng Malaysia

Risk-Adjusted Performance

0 of 100

Very Weak

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

CB Industrial Product

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CB Industrial Product are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CB Industrial 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 Keck Seng and CB Industrial

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

The idea behind Keck Seng Malaysia and CB Industrial Product 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.