Correlation Between Sunway Construction and Dagang Nexchange

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

Diversification Opportunities for Sunway Construction and Dagang Nexchange

-0.09

Correlation Coefficient

Sunway Construction  Dagang Nexchange

Good diversification

The 3 months correlation between Sunway and Dagang is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sunway Construction Group and Dagang Nexchange Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dagang Nexchange 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 Dagang Nexchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dagang Nexchange Bhd has no effect on the direction of Sunway Construction i.e., Sunway Construction and Dagang Nexchange go up and down completely randomly.

Pair Corralation between Sunway Construction and Dagang Nexchange

Assuming the 90 days trading horizon Sunway Construction is expected to generate 1.28 times less return on investment than Dagang Nexchange. But when comparing it to its historical volatility, Sunway Construction Group is 1.66 times less risky than Dagang Nexchange. It trades about 0.13 of its potential returns per unit of risk. Dagang Nexchange Bhd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Dagang Nexchange Bhd on September 25, 2024 and sell it today you would earn a total of  2.00  from holding Dagang Nexchange Bhd or generate 5.56% 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.  Dagang Nexchange 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.

Dagang Nexchange Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dagang Nexchange Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Dagang Nexchange disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunway Construction and Dagang Nexchange

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

The idea behind Sunway Construction Group and Dagang Nexchange 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.