Correlation Between ITMAX System and RCE Capital

Can any of the company-specific risk be diversified away by investing in both ITMAX System and RCE Capital 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 ITMAX System and RCE Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ITMAX System Berhad and RCE Capital Berhad, you can compare the effects of market volatilities on ITMAX System and RCE Capital 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 ITMAX System with a short position of RCE Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITMAX System and RCE Capital.

Diversification Opportunities for ITMAX System and RCE Capital

-0.39

Correlation Coefficient

ITMAX System  RCE Capital

Very good diversification

The 3 months correlation between ITMAX and RCE is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ITMAX System Berhad and RCE Capital Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCE Capital Berhad and ITMAX System 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 ITMAX System Berhad are associated (or correlated) with RCE Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCE Capital Berhad has no effect on the direction of ITMAX System i.e., ITMAX System and RCE Capital go up and down completely randomly.

Pair Corralation between ITMAX System and RCE Capital

Assuming the 90 days trading horizon ITMAX System Berhad is expected to generate 0.97 times more return on investment than RCE Capital. However, ITMAX System Berhad is 1.03 times less risky than RCE Capital. It trades about 0.0 of its potential returns per unit of risk. RCE Capital Berhad is currently generating about -0.05 per unit of risk. If you would invest  360.00  in ITMAX System Berhad on September 24, 2024 and sell it today you would lose (4.00) from holding ITMAX System Berhad or give up 1.11% of portfolio value over 90 days.

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

ITMAX System Berhad  vs.  RCE Capital Berhad

ITMAX System Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITMAX System Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, ITMAX System is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

RCE Capital Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCE Capital Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, RCE Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ITMAX System and RCE Capital

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

The idea behind ITMAX System Berhad and RCE Capital Berhad 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.