Correlation Between PIE Industrial and Senheng New

Can any of the company-specific risk be diversified away by investing in both PIE Industrial and Senheng New 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 PIE Industrial and Senheng New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIE Industrial Bhd and Senheng New Retail, you can compare the effects of market volatilities on PIE Industrial and Senheng New 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 PIE Industrial with a short position of Senheng New. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIE Industrial and Senheng New.

Diversification Opportunities for PIE Industrial and Senheng New

0.45

Correlation Coefficient

PIE Industrial  Senheng New

Very weak diversification

The 3 months correlation between PIE and Senheng is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding PIE Industrial Bhd and Senheng New Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senheng New Retail and PIE 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 PIE Industrial Bhd are associated (or correlated) with Senheng New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senheng New Retail has no effect on the direction of PIE Industrial i.e., PIE Industrial and Senheng New go up and down completely randomly.

Pair Corralation between PIE Industrial and Senheng New

Assuming the 90 days trading horizon PIE Industrial is expected to generate 4.0 times less return on investment than Senheng New. But when comparing it to its historical volatility, PIE Industrial Bhd is 1.8 times less risky than Senheng New. It trades about 0.15 of its potential returns per unit of risk. Senheng New Retail is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Senheng New Retail on September 24, 2024 and sell it today you would earn a total of  4.00  from holding Senheng New Retail or generate 16.67% return on investment over 90 days.

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

PIE Industrial Bhd  vs.  Senheng New Retail

PIE Industrial Bhd

Risk-Adjusted Performance

10 of 100

OK

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

Senheng New Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Senheng New Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Senheng New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PIE Industrial and Senheng New

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

The idea behind PIE Industrial Bhd and Senheng New Retail 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 Stocks Directory module to find actively traded stocks across global markets.