Correlation Between Oriental Food and Petronas Chemicals
Can any of the company-specific risk be diversified away by investing in both Oriental Food and Petronas Chemicals 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 Oriental Food and Petronas Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oriental Food Industries and Petronas Chemicals Group, you can compare the effects of market volatilities on Oriental Food and Petronas Chemicals 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 Oriental Food with a short position of Petronas Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Food and Petronas Chemicals.
Diversification Opportunities for Oriental Food and Petronas Chemicals
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oriental and Petronas is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Food Industries and Petronas Chemicals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronas Chemicals and Oriental Food 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 Oriental Food Industries are associated (or correlated) with Petronas Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronas Chemicals has no effect on the direction of Oriental Food i.e., Oriental Food and Petronas Chemicals go up and down completely randomly.
Pair Corralation between Oriental Food and Petronas Chemicals
Assuming the 90 days trading horizon Oriental Food Industries is expected to generate 0.83 times more return on investment than Petronas Chemicals. However, Oriental Food Industries is 1.2 times less risky than Petronas Chemicals. It trades about -0.06 of its potential returns per unit of risk. Petronas Chemicals Group is currently generating about -0.08 per unit of risk. If you would invest 179.00 in Oriental Food Industries on November 2, 2024 and sell it today you would lose (19.00) from holding Oriental Food Industries or give up 10.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oriental Food Industries vs. Petronas Chemicals Group
Performance |
| Timeline |
| Oriental Food Industries |
| Petronas Chemicals |
Oriental Food and Petronas Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oriental Food and Petronas Chemicals
The main advantage of trading using opposite Oriental Food and Petronas Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Food position performs unexpectedly, Petronas Chemicals 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 Petronas Chemicals will offset losses from the drop in Petronas Chemicals' long position.| Oriental Food vs. Dnonce Tech Bhd | Oriental Food vs. Kobay Tech Bhd | Oriental Food vs. PIE Industrial Bhd | Oriental Food vs. British American Tobacco |
| Petronas Chemicals vs. Diversified Gateway Solutions | Petronas Chemicals vs. Dataprep Holdings Bhd | Petronas Chemicals vs. IHH Healthcare Bhd | Petronas Chemicals vs. Kluang Rubber |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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