Correlation Between KPJ Healthcare and Brite Tech

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Can any of the company-specific risk be diversified away by investing in both KPJ Healthcare and Brite Tech 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 KPJ Healthcare and Brite Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KPJ Healthcare Bhd and Brite Tech Bhd, you can compare the effects of market volatilities on KPJ Healthcare and Brite Tech 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 KPJ Healthcare with a short position of Brite Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPJ Healthcare and Brite Tech.

Diversification Opportunities for KPJ Healthcare and Brite Tech

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between KPJ and Brite is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Brite Tech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brite Tech Bhd and KPJ Healthcare 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 KPJ Healthcare Bhd are associated (or correlated) with Brite Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brite Tech Bhd has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Brite Tech go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Brite Tech

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to generate 0.64 times more return on investment than Brite Tech. However, KPJ Healthcare Bhd is 1.56 times less risky than Brite Tech. It trades about 0.73 of its potential returns per unit of risk. Brite Tech Bhd is currently generating about 0.09 per unit of risk. If you would invest  207.00  in KPJ Healthcare Bhd on August 30, 2024 and sell it today you would earn a total of  43.00  from holding KPJ Healthcare Bhd or generate 20.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

KPJ Healthcare Bhd  vs.  Brite Tech Bhd

 Performance 
       Timeline  
KPJ Healthcare Bhd 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in KPJ Healthcare Bhd are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, KPJ Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.
Brite Tech Bhd 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Brite Tech Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Brite Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

KPJ Healthcare and Brite Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KPJ Healthcare and Brite Tech

The main advantage of trading using opposite KPJ Healthcare and Brite Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KPJ Healthcare position performs unexpectedly, Brite Tech 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 Brite Tech will offset losses from the drop in Brite Tech's long position.
The idea behind KPJ Healthcare Bhd and Brite Tech 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.
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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