Correlation Between KPJ Healthcare and Al Aqar

Can any of the company-specific risk be diversified away by investing in both KPJ Healthcare and Al Aqar 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 KPJ Healthcare and Al Aqar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KPJ Healthcare Bhd and Al Aqar Healthcare, you can compare the effects of market volatilities on KPJ Healthcare and Al Aqar 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 KPJ Healthcare with a short position of Al Aqar. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPJ Healthcare and Al Aqar.

Diversification Opportunities for KPJ Healthcare and Al Aqar

0.4

Correlation Coefficient

KPJ Healthcare  Al Aqar

Very weak diversification

The 3 months correlation between KPJ and 5116 is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Al Aqar Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Aqar Healthcare and KPJ Healthcare 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 KPJ Healthcare Bhd are associated (or correlated) with Al Aqar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Aqar Healthcare has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Al Aqar go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Al Aqar

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to generate 2.19 times more return on investment than Al Aqar. However, KPJ Healthcare is 2.19 times more volatile than Al Aqar Healthcare. It trades about 0.16 of its potential returns per unit of risk. Al Aqar Healthcare is currently generating about -0.05 per unit of risk. If you would invest  219.00  in KPJ Healthcare Bhd on September 15, 2024 and sell it today you would earn a total of  19.00  from holding KPJ Healthcare Bhd or generate 8.68% return on investment over 90 days.

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

KPJ Healthcare Bhd  vs.  Al Aqar Healthcare

KPJ Healthcare Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, KPJ Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Al Aqar Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Al Aqar Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Al Aqar 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 KPJ Healthcare and Al Aqar

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

The idea behind KPJ Healthcare Bhd and Al Aqar Healthcare 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.