Correlation Between Padini Holdings and Malayan Banking

Can any of the company-specific risk be diversified away by investing in both Padini Holdings and Malayan Banking 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 Padini Holdings and Malayan Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Padini Holdings and Malayan Banking

0.42

Correlation Coefficient

Padini Holdings  Malayan Banking

Very weak diversification

The 3 months correlation between Padini and Malayan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Padini Holdings Bhd and Malayan Banking Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malayan Banking Bhd and Padini Holdings 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 Padini Holdings Bhd are associated (or correlated) with Malayan Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malayan Banking Bhd has no effect on the direction of Padini Holdings i.e., Padini Holdings and Malayan Banking go up and down completely randomly.

Pair Corralation between Padini Holdings and Malayan Banking

Assuming the 90 days trading horizon Padini Holdings Bhd is expected to generate 1.77 times more return on investment than Malayan Banking. However, Padini Holdings is 1.77 times more volatile than Malayan Banking Bhd. It trades about 0.01 of its potential returns per unit of risk. Malayan Banking Bhd is currently generating about -0.12 per unit of risk. If you would invest  328.00  in Padini Holdings Bhd on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Padini Holdings Bhd or generate 0.0% return on investment over 90 days.

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

Padini Holdings Bhd  vs.  Malayan Banking Bhd

Padini Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Malayan Banking Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malayan Banking Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Malayan Banking 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 Padini Holdings and Malayan Banking

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

The idea behind Padini Holdings Bhd and Malayan Banking 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.