Correlation Between Petronas Chemicals and Genting Malaysia
Can any of the company-specific risk be diversified away by investing in both Petronas Chemicals and Genting Malaysia 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 Petronas Chemicals and Genting Malaysia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petronas Chemicals Group and Genting Malaysia Bhd, you can compare the effects of market volatilities on Petronas Chemicals and Genting Malaysia 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 Petronas Chemicals with a short position of Genting Malaysia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petronas Chemicals and Genting Malaysia.
Diversification Opportunities for Petronas Chemicals and Genting Malaysia
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Petronas and Genting is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Petronas Chemicals Group and Genting Malaysia Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genting Malaysia Bhd and Petronas Chemicals 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 Petronas Chemicals Group are associated (or correlated) with Genting Malaysia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genting Malaysia Bhd has no effect on the direction of Petronas Chemicals i.e., Petronas Chemicals and Genting Malaysia go up and down completely randomly.
Pair Corralation between Petronas Chemicals and Genting Malaysia
Assuming the 90 days trading horizon Petronas Chemicals Group is expected to under-perform the Genting Malaysia. In addition to that, Petronas Chemicals is 1.39 times more volatile than Genting Malaysia Bhd. It trades about -0.16 of its total potential returns per unit of risk. Genting Malaysia Bhd is currently generating about -0.14 per unit of volatility. If you would invest 246.00 in Genting Malaysia Bhd on September 2, 2024 and sell it today you would lose (30.00) from holding Genting Malaysia Bhd or give up 12.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petronas Chemicals Group vs. Genting Malaysia Bhd
Performance |
| Timeline |
| Petronas Chemicals |
| Genting Malaysia Bhd |
Petronas Chemicals and Genting Malaysia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petronas Chemicals and Genting Malaysia
The main advantage of trading using opposite Petronas Chemicals and Genting Malaysia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petronas Chemicals position performs unexpectedly, Genting Malaysia 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 Genting Malaysia will offset losses from the drop in Genting Malaysia's long position.The idea behind Petronas Chemicals Group and Genting Malaysia 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.| Genting Malaysia vs. Digistar Bhd | Genting Malaysia vs. Minetech Resources Bhd | Genting Malaysia vs. Swift Haulage Bhd | Genting Malaysia vs. Bina Darulaman 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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