Correlation Between Hong Leong and RCE Capital
Can any of the company-specific risk be diversified away by investing in both Hong Leong and RCE Capital 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 RCE Capital 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 RCE Capital Berhad, you can compare the effects of market volatilities on Hong Leong and RCE Capital 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 RCE Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and RCE Capital.
Diversification Opportunities for Hong Leong and RCE Capital
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hong and RCE is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and RCE Capital Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCE Capital 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 RCE Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCE Capital Berhad has no effect on the direction of Hong Leong i.e., Hong Leong and RCE Capital go up and down completely randomly.
Pair Corralation between Hong Leong and RCE Capital
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.46 times more return on investment than RCE Capital. However, Hong Leong Bank is 2.17 times less risky than RCE Capital. It trades about -0.13 of its potential returns per unit of risk. RCE Capital Berhad is currently generating about -0.28 per unit of risk. If you would invest 2,050 in Hong Leong Bank on November 4, 2024 and sell it today you would lose (30.00) from holding Hong Leong Bank or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. RCE Capital Berhad
Performance |
| Timeline |
| Hong Leong Bank |
| RCE Capital Berhad |
Hong Leong and RCE Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and RCE Capital
The main advantage of trading using opposite Hong Leong and RCE Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, RCE Capital 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 RCE Capital will offset losses from the drop in RCE Capital's long position.| Hong Leong vs. Tex Cycle Technology | Hong Leong vs. Leader Steel Holdings | Hong Leong vs. Sports Toto Berhad | Hong Leong vs. Sapura Industrial Bhd |
| RCE Capital vs. PMB Technology Bhd | RCE Capital vs. Uchi Technologies Bhd | RCE Capital vs. Sports Toto Berhad | RCE Capital vs. YX Precious Metals |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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