Correlation Between Tenaga Nasional and Batu Kawan

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

Diversification Opportunities for Tenaga Nasional and Batu Kawan

-0.63

Correlation Coefficient

Tenaga Nasional  Batu Kawan

Excellent diversification

The 3 months correlation between Tenaga and Batu is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Batu Kawan Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batu Kawan Bhd 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 Batu Kawan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batu Kawan Bhd has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Batu Kawan go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Batu Kawan

Assuming the 90 days trading horizon Tenaga Nasional Bhd is expected to under-perform the Batu Kawan. In addition to that, Tenaga Nasional is 2.96 times more volatile than Batu Kawan Bhd. It trades about -0.08 of its total potential returns per unit of risk. Batu Kawan Bhd is currently generating about 0.09 per unit of volatility. If you would invest  1,960  in Batu Kawan Bhd on September 15, 2024 and sell it today you would earn a total of  44.00  from holding Batu Kawan Bhd or generate 2.24% return on investment over 90 days.

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

Tenaga Nasional Bhd  vs.  Batu Kawan Bhd

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 quite persistent basic indicators, Tenaga Nasional is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Batu Kawan Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Batu Kawan Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Batu Kawan 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 Batu Kawan

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

The idea behind Tenaga Nasional Bhd and Batu Kawan 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.