Correlation Between CB Industrial and Microlink Solutions

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Can any of the company-specific risk be diversified away by investing in both CB Industrial and Microlink Solutions 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 CB Industrial and Microlink Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CB Industrial Product and Microlink Solutions Bhd, you can compare the effects of market volatilities on CB Industrial and Microlink Solutions 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 CB Industrial with a short position of Microlink Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and Microlink Solutions.

Diversification Opportunities for CB Industrial and Microlink Solutions

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between 7076 and Microlink is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and Microlink Solutions Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microlink Solutions Bhd and CB Industrial 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 CB Industrial Product are associated (or correlated) with Microlink Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microlink Solutions Bhd has no effect on the direction of CB Industrial i.e., CB Industrial and Microlink Solutions go up and down completely randomly.

Pair Corralation between CB Industrial and Microlink Solutions

Assuming the 90 days trading horizon CB Industrial is expected to generate 15.84 times less return on investment than Microlink Solutions. But when comparing it to its historical volatility, CB Industrial Product is 6.32 times less risky than Microlink Solutions. It trades about 0.04 of its potential returns per unit of risk. Microlink Solutions Bhd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Microlink Solutions Bhd on September 23, 2024 and sell it today you would earn a total of  5.00  from holding Microlink Solutions Bhd or generate 29.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CB Industrial Product  vs.  Microlink Solutions Bhd

 Performance 
       Timeline  
CB Industrial Product 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Microlink Solutions Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Microlink Solutions disclosed solid returns over the last few months and may actually be approaching a breakup point.

CB Industrial and Microlink Solutions Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CB Industrial and Microlink Solutions

The main advantage of trading using opposite CB Industrial and Microlink Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CB Industrial position performs unexpectedly, Microlink Solutions 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 Microlink Solutions will offset losses from the drop in Microlink Solutions' long position.
The idea behind CB Industrial Product and Microlink Solutions 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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