Correlation Between BP Plastics and PIE Industrial
Can any of the company-specific risk be diversified away by investing in both BP Plastics and PIE Industrial 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 PIE Industrial 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 PIE Industrial Bhd, you can compare the effects of market volatilities on BP Plastics and PIE Industrial 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 PIE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plastics and PIE Industrial.
Diversification Opportunities for BP Plastics and PIE Industrial
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 5100 and PIE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BP Plastics Holding and PIE Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIE Industrial 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 PIE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIE Industrial Bhd has no effect on the direction of BP Plastics i.e., BP Plastics and PIE Industrial go up and down completely randomly.
Pair Corralation between BP Plastics and PIE Industrial
Assuming the 90 days trading horizon BP Plastics Holding is expected to under-perform the PIE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, BP Plastics Holding is 1.66 times less risky than PIE Industrial. The stock trades about -0.1 of its potential returns per unit of risk. The PIE Industrial Bhd is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 500.00 in PIE Industrial Bhd on September 4, 2024 and sell it today you would earn a total of 103.00 from holding PIE Industrial Bhd or generate 20.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP Plastics Holding vs. PIE Industrial Bhd
Performance |
| Timeline |
| BP Plastics Holding |
| PIE Industrial Bhd |
BP Plastics and PIE Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plastics and PIE Industrial
The main advantage of trading using opposite BP Plastics and PIE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plastics position performs unexpectedly, PIE Industrial 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 PIE Industrial will offset losses from the drop in PIE Industrial's long position.| BP Plastics vs. PIE Industrial Bhd | BP Plastics vs. Uchi Technologies Bhd | BP Plastics vs. Aeon Credit Service | BP Plastics vs. Malayan Banking Bhd |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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