Correlation Between Hong Leong and Malayan Banking
Can any of the company-specific risk be diversified away by investing in both Hong Leong and Malayan Banking 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 Hong Leong and Malayan Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Leong Bank and Malayan Banking Bhd, you can compare the effects of market volatilities on Hong Leong and Malayan Banking 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 Hong Leong with a short position of Malayan Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Malayan Banking.
Diversification Opportunities for Hong Leong and Malayan Banking
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hong and Malayan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Malayan Banking Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malayan Banking Bhd and Hong Leong 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 Hong Leong Bank are associated (or correlated) with Malayan Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malayan Banking Bhd has no effect on the direction of Hong Leong i.e., Hong Leong and Malayan Banking go up and down completely randomly.
Pair Corralation between Hong Leong and Malayan Banking
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.82 times more return on investment than Malayan Banking. However, Hong Leong Bank is 1.22 times less risky than Malayan Banking. It trades about 0.02 of its potential returns per unit of risk. Malayan Banking Bhd is currently generating about -0.12 per unit of risk. If you would invest 2,043 in Hong Leong Bank on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Hong Leong Bank or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. Malayan Banking Bhd
Performance |
| Timeline |
| Hong Leong Bank |
| Malayan Banking Bhd |
Hong Leong and Malayan Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and Malayan Banking
The main advantage of trading using opposite Hong Leong and Malayan Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, Malayan Banking 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 Malayan Banking will offset losses from the drop in Malayan Banking's long position.| Hong Leong vs. ES Ceramics Technology | Hong Leong vs. ONETECH SOLUTIONS HOLDINGS | Hong Leong vs. Computer Forms Bhd | Hong Leong vs. Radiant Globaltech Bhd |
| Malayan Banking vs. Cengild Medical Berhad | Malayan Banking vs. YX Precious Metals | Malayan Banking vs. Melewar Industrial Group | Malayan Banking vs. Petronas Chemicals Group |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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