Correlation Between Aeon Credit and Public Bank

Can any of the company-specific risk be diversified away by investing in both Aeon Credit and Public Bank 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 Public Bank 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 Public Bank Bhd, you can compare the effects of market volatilities on Aeon Credit and Public Bank 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 Public Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeon Credit and Public Bank.

Diversification Opportunities for Aeon Credit and Public Bank

0.24

Correlation Coefficient

Aeon Credit  Public Bank

Modest diversification

The 3 months correlation between Aeon and Public is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aeon Credit Service and Public Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Bank 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 Public Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Bank Bhd has no effect on the direction of Aeon Credit i.e., Aeon Credit and Public Bank go up and down completely randomly.

Pair Corralation between Aeon Credit and Public Bank

Assuming the 90 days trading horizon Aeon Credit Service is expected to under-perform the Public Bank. But the stock apears to be less risky and, when comparing its historical volatility, Aeon Credit Service is 1.15 times less risky than Public Bank. The stock trades about -0.22 of its potential returns per unit of risk. The Public Bank Bhd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  470.00  in Public Bank Bhd on September 16, 2024 and sell it today you would lose (13.00) from holding Public Bank Bhd or give up 2.77% of portfolio value over 90 days.

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

Aeon Credit Service  vs.  Public Bank 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.

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Aeon Credit Service and Public Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.