Correlation Between MISC Bhd and Petronas Gas

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

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

Diversification Opportunities for MISC Bhd and Petronas Gas

0.43

Correlation Coefficient

MISC Bhd  Petronas Gas

Very weak diversification

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

Pair Corralation between MISC Bhd and Petronas Gas

Assuming the 90 days trading horizon MISC Bhd is expected to under-perform the Petronas Gas. In addition to that, MISC Bhd is 2.2 times more volatile than Petronas Gas Bhd. It trades about -0.05 of its total potential returns per unit of risk. Petronas Gas Bhd is currently generating about -0.08 per unit of volatility. If you would invest  1,786  in Petronas Gas Bhd on September 12, 2024 and sell it today you would lose (46.00) from holding Petronas Gas Bhd or give up 2.58% of portfolio value over 90 days.

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

MISC Bhd  vs.  Petronas Gas Bhd

MISC Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Petronas Gas Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind MISC Bhd and Petronas Gas 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.