Correlation Between Press Metal and RCE Capital

Can any of the company-specific risk be diversified away by investing in both Press Metal and RCE Capital 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 Press Metal and RCE Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Press Metal and RCE Capital

-0.61

Correlation Coefficient

Press Metal  RCE Capital

Excellent diversification

The 3 months correlation between Press and RCE is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Press Metal Bhd and RCE Capital Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCE Capital Berhad and Press Metal 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 Press Metal Bhd are associated (or correlated) with RCE Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCE Capital Berhad has no effect on the direction of Press Metal i.e., Press Metal and RCE Capital go up and down completely randomly.

Pair Corralation between Press Metal and RCE Capital

Assuming the 90 days trading horizon Press Metal is expected to generate 16.3 times less return on investment than RCE Capital. But when comparing it to its historical volatility, Press Metal Bhd is 1.12 times less risky than RCE Capital. It trades about 0.01 of its potential returns per unit of risk. RCE Capital Berhad is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  74.00  in RCE Capital Berhad on September 24, 2024 and sell it today you would earn a total of  82.00  from holding RCE Capital Berhad or generate 110.81% return on investment over 90 days.

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

Press Metal Bhd  vs.  RCE Capital Berhad

Press Metal Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

RCE Capital Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCE Capital Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, RCE Capital 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 Press Metal and RCE Capital

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

The idea behind Press Metal Bhd and RCE Capital Berhad 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.