Correlation Between Hong Leong and Tadmax Resources
Can any of the company-specific risk be diversified away by investing in both Hong Leong and Tadmax Resources 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 Tadmax Resources 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 Tadmax Resources Berhad, you can compare the effects of market volatilities on Hong Leong and Tadmax Resources 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 Tadmax Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Tadmax Resources.
Diversification Opportunities for Hong Leong and Tadmax Resources
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hong and Tadmax is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Tadmax Resources Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tadmax Resources Berhad 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 Tadmax Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tadmax Resources Berhad has no effect on the direction of Hong Leong i.e., Hong Leong and Tadmax Resources go up and down completely randomly.
Pair Corralation between Hong Leong and Tadmax Resources
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.18 times more return on investment than Tadmax Resources. However, Hong Leong Bank is 5.46 times less risky than Tadmax Resources. It trades about 0.02 of its potential returns per unit of risk. Tadmax Resources Berhad is currently generating about -0.07 per unit of risk. If you would invest 2,050 in Hong Leong Bank on August 31, 2024 and sell it today you would earn a total of 6.00 from holding Hong Leong Bank or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. Tadmax Resources Berhad
Performance |
| Timeline |
| Hong Leong Bank |
| Tadmax Resources Berhad |
Hong Leong and Tadmax Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and Tadmax Resources
The main advantage of trading using opposite Hong Leong and Tadmax Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, Tadmax Resources 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 Tadmax Resources will offset losses from the drop in Tadmax Resources' long position.The idea behind Hong Leong Bank and Tadmax Resources 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.| Tadmax Resources vs. Binasat Communications Bhd | Tadmax Resources vs. Senheng New Retail | Tadmax Resources vs. Computer Forms Bhd | Tadmax Resources vs. Sports Toto Berhad |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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