Correlation Between Sapura Industrial and Petronas Chemicals

Can any of the company-specific risk be diversified away by investing in both Sapura Industrial and Petronas Chemicals 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 Petronas Chemicals 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 Petronas Chemicals Group, you can compare the effects of market volatilities on Sapura Industrial and Petronas Chemicals 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 Petronas Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapura Industrial and Petronas Chemicals.

Diversification Opportunities for Sapura Industrial and Petronas Chemicals

-0.51

Correlation Coefficient

Sapura Industrial  Petronas Chemicals

Excellent diversification

The 3 months correlation between Sapura and Petronas is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sapura Industrial Bhd and Petronas Chemicals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronas Chemicals 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 Petronas Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronas Chemicals has no effect on the direction of Sapura Industrial i.e., Sapura Industrial and Petronas Chemicals go up and down completely randomly.

Pair Corralation between Sapura Industrial and Petronas Chemicals

Assuming the 90 days trading horizon Sapura Industrial Bhd is expected to generate 0.93 times more return on investment than Petronas Chemicals. However, Sapura Industrial Bhd is 1.07 times less risky than Petronas Chemicals. It trades about 0.06 of its potential returns per unit of risk. Petronas Chemicals Group is currently generating about -0.13 per unit of risk. If you would invest  81.00  in Sapura Industrial Bhd on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Sapura Industrial Bhd or generate 6.17% return on investment over 90 days.

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

Sapura Industrial Bhd  vs.  Petronas Chemicals Group

Sapura Industrial Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

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

Petronas Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petronas Chemicals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sapura Industrial and Petronas Chemicals

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

The idea behind Sapura Industrial Bhd and Petronas Chemicals Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.