Correlation Between Aeon Credit and Malayan Banking

Can any of the company-specific risk be diversified away by investing in both Aeon Credit and Malayan Banking 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 Aeon Credit and Malayan Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Aeon Credit and Malayan Banking

0.86

Correlation Coefficient

Aeon Credit  Malayan Banking

Very poor diversification

The 3 months correlation between Aeon and Malayan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aeon Credit Service and Malayan Banking Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malayan Banking Bhd and Aeon Credit 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 Aeon Credit Service are associated (or correlated) with Malayan Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malayan Banking Bhd has no effect on the direction of Aeon Credit i.e., Aeon Credit and Malayan Banking go up and down completely randomly.

Pair Corralation between Aeon Credit and Malayan Banking

Assuming the 90 days trading horizon Aeon Credit Service is expected to under-perform the Malayan Banking. In addition to that, Aeon Credit is 1.58 times more volatile than Malayan Banking Bhd. It trades about -0.2 of its total potential returns per unit of risk. Malayan Banking Bhd is currently generating about -0.14 per unit of volatility. If you would invest  1,070  in Malayan Banking Bhd on September 25, 2024 and sell it today you would lose (62.00) from holding Malayan Banking Bhd or give up 5.79% of portfolio value over 90 days.

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

Aeon Credit Service  vs.  Malayan Banking Bhd

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Malayan Banking Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Aeon Credit Service and Malayan Banking 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.