Correlation Between BP Plastics and Petronas Gas
Can any of the company-specific risk be diversified away by investing in both BP Plastics and Petronas Gas 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 BP Plastics and Petronas Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Plastics Holding and Petronas Gas Bhd, you can compare the effects of market volatilities on BP Plastics and Petronas Gas 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 BP Plastics with a short position of Petronas Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plastics and Petronas Gas.
Diversification Opportunities for BP Plastics and Petronas Gas
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 5100 and Petronas is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BP Plastics Holding and Petronas Gas Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronas Gas Bhd and BP Plastics 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 BP Plastics Holding are associated (or correlated) with Petronas Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronas Gas Bhd has no effect on the direction of BP Plastics i.e., BP Plastics and Petronas Gas go up and down completely randomly.
Pair Corralation between BP Plastics and Petronas Gas
Assuming the 90 days trading horizon BP Plastics is expected to generate 1.18 times less return on investment than Petronas Gas. In addition to that, BP Plastics is 3.0 times more volatile than Petronas Gas Bhd. It trades about 0.06 of its total potential returns per unit of risk. Petronas Gas Bhd is currently generating about 0.22 per unit of volatility. If you would invest 1,740 in Petronas Gas Bhd on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Petronas Gas Bhd or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
BP Plastics Holding vs. Petronas Gas Bhd
Performance |
| Timeline |
| BP Plastics Holding |
| Petronas Gas Bhd |
BP Plastics and Petronas Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plastics and Petronas Gas
The main advantage of trading using opposite BP Plastics and Petronas Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plastics position performs unexpectedly, Petronas Gas 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 Gas will offset losses from the drop in Petronas Gas' long position.| BP Plastics vs. Aurelius Technologies Bhd | BP Plastics vs. FARM FRESH BERHAD | BP Plastics vs. Nova Wellness Group | BP Plastics vs. Magni Tech Industries |
| Petronas Gas vs. Eversafe Rubber Bhd | Petronas Gas vs. BP Plastics Holding | Petronas Gas vs. Daya Materials Bhd | Petronas Gas vs. Press Metal Bhd |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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