Correlation Between Sapura Industrial and Systech Bhd

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

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

Diversification Opportunities for Sapura Industrial and Systech Bhd

0.14

Correlation Coefficient

Sapura Industrial  Systech Bhd

Average diversification

The 3 months correlation between Sapura and Systech is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sapura Industrial Bhd and Systech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Systech Bhd and Sapura 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 Sapura Industrial Bhd are associated (or correlated) with Systech Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Systech Bhd has no effect on the direction of Sapura Industrial i.e., Sapura Industrial and Systech Bhd go up and down completely randomly.

Pair Corralation between Sapura Industrial and Systech Bhd

Assuming the 90 days trading horizon Sapura Industrial is expected to generate 1.97 times less return on investment than Systech Bhd. But when comparing it to its historical volatility, Sapura Industrial Bhd is 1.57 times less risky than Systech Bhd. It trades about 0.04 of its potential returns per unit of risk. Systech Bhd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Systech Bhd on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Systech Bhd or generate 6.67% return on investment over 90 days.

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

Sapura Industrial Bhd  vs.  Systech Bhd

Sapura Industrial Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sapura Industrial Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sapura Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Systech Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Systech Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Systech Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sapura Industrial and Systech Bhd

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

The idea behind Sapura Industrial Bhd and Systech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.