Correlation Between Petronas Chemicals and Eversafe Rubber

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

Diversification Opportunities for Petronas Chemicals and Eversafe Rubber

0.8

Correlation Coefficient

Petronas Chemicals  Eversafe Rubber

Very poor diversification

The 3 months correlation between Petronas and Eversafe is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and Eversafe Rubber Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversafe Rubber 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 Eversafe Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversafe Rubber Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and Eversafe Rubber go up and down completely randomly.

Pair Corralation between Petronas Chemicals and Eversafe Rubber

Assuming the 90 days trading horizon Petronas Chemicals Group is expected to generate 0.5 times more return on investment than Eversafe Rubber. However, Petronas Chemicals Group is 2.01 times less risky than Eversafe Rubber. It trades about -0.08 of its potential returns per unit of risk. Eversafe Rubber Bhd is currently generating about -0.04 per unit of risk. If you would invest  558.00  in Petronas Chemicals Group on September 14, 2024 and sell it today you would lose (60.00) from holding Petronas Chemicals Group or give up 10.75% of portfolio value over 90 days.

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

Petronas Chemicals Group  vs.  Eversafe Rubber 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 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.

Eversafe Rubber Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eversafe Rubber 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 Petronas Chemicals and Eversafe Rubber

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

The idea behind Petronas Chemicals Group and Eversafe Rubber 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..