Correlation Between Sunway Construction and Digistar Bhd

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

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

Diversification Opportunities for Sunway Construction and Digistar Bhd

-0.33

Correlation Coefficient

Sunway Construction  Digistar Bhd

Very good diversification

The 3 months correlation between Sunway and Digistar is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sunway Construction Group and Digistar Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digistar Bhd and Sunway Construction 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 Sunway Construction Group are associated (or correlated) with Digistar Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digistar Bhd has no effect on the direction of Sunway Construction i.e., Sunway Construction and Digistar Bhd go up and down completely randomly.

Pair Corralation between Sunway Construction and Digistar Bhd

Assuming the 90 days trading horizon Sunway Construction is expected to generate 4.61 times less return on investment than Digistar Bhd. But when comparing it to its historical volatility, Sunway Construction Group is 2.94 times less risky than Digistar Bhd. It trades about 0.03 of its potential returns per unit of risk. Digistar Bhd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Digistar Bhd on September 14, 2024 and sell it today you would earn a total of  0.50  from holding Digistar Bhd or generate 10.0% return on investment over 90 days.

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

Sunway Construction Group  vs.  Digistar Bhd

Sunway Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunway Construction Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sunway Construction is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Digistar Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sunway Construction and Digistar Bhd

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

The idea behind Sunway Construction Group and Digistar 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .