Correlation Between Hong Leong and Telekom Malaysia
Can any of the company-specific risk be diversified away by investing in both Hong Leong and Telekom 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 Hong Leong and Telekom Malaysia 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 Telekom Malaysia Bhd, you can compare the effects of market volatilities on Hong Leong and Telekom 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 Hong Leong with a short position of Telekom Malaysia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Telekom Malaysia.
Diversification Opportunities for Hong Leong and Telekom Malaysia
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hong and Telekom is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Telekom Malaysia Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telekom Malaysia 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 Telekom Malaysia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telekom Malaysia Bhd has no effect on the direction of Hong Leong i.e., Hong Leong and Telekom Malaysia go up and down completely randomly.
Pair Corralation between Hong Leong and Telekom Malaysia
Assuming the 90 days trading horizon Hong Leong is expected to generate 4.18 times less return on investment than Telekom Malaysia. But when comparing it to its historical volatility, Hong Leong Bank is 1.63 times less risky than Telekom Malaysia. It trades about 0.02 of its potential returns per unit of risk. Telekom Malaysia Bhd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 499.00 in Telekom Malaysia Bhd on September 18, 2024 and sell it today you would earn a total of 174.00 from holding Telekom Malaysia Bhd or generate 34.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Hong Leong Bank vs. Telekom Malaysia Bhd
Performance |
| Timeline |
| Hong Leong Bank |
| Telekom Malaysia Bhd |
Hong Leong and Telekom Malaysia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and Telekom Malaysia
The main advantage of trading using opposite Hong Leong and Telekom Malaysia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, Telekom 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 Telekom Malaysia will offset losses from the drop in Telekom Malaysia's long position.The idea behind Hong Leong Bank and Telekom 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.| Telekom Malaysia vs. Awanbiru Technology Bhd | Telekom Malaysia vs. YX Precious Metals | Telekom Malaysia vs. Shangri La Hotels | Telekom Malaysia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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