Correlation Between Tenaga Nasional and Homeritz Bhd

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

Diversification Opportunities for Tenaga Nasional and Homeritz Bhd

-0.38

Correlation Coefficient

Tenaga Nasional  Homeritz Bhd

Very good diversification

The 3 months correlation between Tenaga and Homeritz is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tenaga Nasional Bhd and Homeritz Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeritz 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 Homeritz Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeritz Bhd has no effect on the direction of Tenaga Nasional i.e., Tenaga Nasional and Homeritz Bhd go up and down completely randomly.

Pair Corralation between Tenaga Nasional and Homeritz Bhd

Assuming the 90 days trading horizon Tenaga Nasional is expected to generate 20.66 times less return on investment than Homeritz Bhd. But when comparing it to its historical volatility, Tenaga Nasional Bhd is 1.32 times less risky than Homeritz Bhd. It trades about 0.02 of its potential returns per unit of risk. Homeritz Bhd is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Homeritz Bhd on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Homeritz Bhd or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Tenaga Nasional Bhd  vs.  Homeritz 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.

Homeritz Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Homeritz Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tenaga Nasional and Homeritz Bhd

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

The idea behind Tenaga Nasional Bhd and Homeritz 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.