Correlation Between Homeritz Bhd and Malpac Holdings

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

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

Diversification Opportunities for Homeritz Bhd and Malpac Holdings

-0.21

Correlation Coefficient

Homeritz Bhd  Malpac Holdings

Very good diversification

The 3 months correlation between Homeritz and Malpac is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and Malpac Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malpac Holdings Bhd and Homeritz 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 Homeritz Bhd are associated (or correlated) with Malpac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malpac Holdings Bhd has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and Malpac Holdings go up and down completely randomly.

Pair Corralation between Homeritz Bhd and Malpac Holdings

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.31 times less return on investment than Malpac Holdings. But when comparing it to its historical volatility, Homeritz Bhd is 3.18 times less risky than Malpac Holdings. It trades about 0.06 of its potential returns per unit of risk. Malpac Holdings Bhd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Malpac Holdings Bhd on September 27, 2024 and sell it today you would lose (10.00) from holding Malpac Holdings Bhd or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Homeritz Bhd  vs.  Malpac Holdings Bhd

Homeritz Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Homeritz Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Malpac Holdings Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malpac Holdings Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Malpac Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Homeritz Bhd and Malpac Holdings

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

The idea behind Homeritz Bhd and Malpac Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.