Correlation Between Petronas Chemicals and Microlink Solutions

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

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

Diversification Opportunities for Petronas Chemicals and Microlink Solutions

0.46

Correlation Coefficient

Petronas Chemicals  Microlink Solutions

Very weak diversification

The 3 months correlation between Petronas and Microlink is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and Microlink Solutions Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microlink Solutions Bhd and Petronas Chemicals 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 Petronas Chemicals Group are associated (or correlated) with Microlink Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microlink Solutions Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and Microlink Solutions go up and down completely randomly.

Pair Corralation between Petronas Chemicals and Microlink Solutions

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the Microlink Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Petronas Chemicals Group is 4.04 times less risky than Microlink Solutions. The stock trades about -0.11 of its potential returns per unit of risk. The Microlink Solutions Bhd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Microlink Solutions Bhd on September 22, 2024 and sell it today you would earn a total of  3.00  from holding Microlink Solutions Bhd or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Petronas Chemicals Group  vs.  Microlink Solutions Bhd

Petronas Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petronas Chemicals Group 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.

Microlink Solutions Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microlink Solutions Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Microlink Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petronas Chemicals and Microlink Solutions

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

The idea behind Petronas Chemicals Group and Microlink Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.