Correlation Between Tenaga Nasional and SFP Tech

Can any of the company-specific risk be diversified away by investing in both Tenaga Nasional and SFP Tech 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 Tenaga Nasional and SFP Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tenaga Nasional Bhd and SFP Tech Holdings, you can compare the effects of market volatilities on Tenaga Nasional and SFP Tech 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 Tenaga Nasional with a short position of SFP Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaga Nasional and SFP Tech.

Diversification Opportunities for Tenaga Nasional and SFP Tech

-0.35

Correlation Coefficient

Tenaga Nasional  SFP Tech

Very good diversification

The 3 months correlation between Tenaga and SFP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and SFP Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFP Tech Holdings and Tenaga Nasional 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 Tenaga Nasional Bhd are associated (or correlated) with SFP Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFP Tech Holdings has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and SFP Tech go up and down completely randomly.

Pair Corralation between Tenaga Nasional and SFP Tech

Assuming the 90 days trading horizon Tenaga Nasional Bhd is expected to under-perform the SFP Tech. But the stock apears to be less risky and, when comparing its historical volatility, Tenaga Nasional Bhd is 2.0 times less risky than SFP Tech. The stock trades about -0.09 of its potential returns per unit of risk. The SFP Tech Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  68.00  in SFP Tech Holdings on September 14, 2024 and sell it today you would earn a total of  2.00  from holding SFP Tech Holdings or generate 2.94% return on investment over 90 days.

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

Tenaga Nasional Bhd  vs.  SFP Tech Holdings

Tenaga Nasional Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenaga Nasional 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.

SFP Tech Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SFP Tech Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SFP Tech 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 Tenaga Nasional and SFP Tech

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

The idea behind Tenaga Nasional Bhd and SFP Tech Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.