Correlation Between Genting Malaysia and Mercury Industries

Can any of the company-specific risk be diversified away by investing in both Genting Malaysia and Mercury Industries 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 Genting Malaysia and Mercury Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Genting Malaysia and Mercury Industries

0.75

Correlation Coefficient

Genting Malaysia  Mercury Industries

Poor diversification

The 3 months correlation between Genting and Mercury is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Genting Malaysia Bhd and Mercury Industries Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Industries Bhd and Genting Malaysia 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 Genting Malaysia Bhd are associated (or correlated) with Mercury Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Industries Bhd has no effect on the direction of Genting Malaysia i.e., Genting Malaysia and Mercury Industries go up and down completely randomly.

Pair Corralation between Genting Malaysia and Mercury Industries

Assuming the 90 days trading horizon Genting Malaysia Bhd is expected to generate 0.69 times more return on investment than Mercury Industries. However, Genting Malaysia Bhd is 1.45 times less risky than Mercury Industries. It trades about -0.08 of its potential returns per unit of risk. Mercury Industries Bhd is currently generating about -0.07 per unit of risk. If you would invest  242.00  in Genting Malaysia Bhd on September 28, 2024 and sell it today you would lose (18.00) from holding Genting Malaysia Bhd or give up 7.44% of portfolio value over 90 days.

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

Genting Malaysia Bhd  vs.  Mercury Industries Bhd

Genting Malaysia Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genting Malaysia Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Mercury Industries Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercury Industries Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Genting Malaysia and Mercury Industries

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

The idea behind Genting Malaysia Bhd and Mercury Industries 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.