Correlation Between PMB Technology and BP Plastics
Can any of the company-specific risk be diversified away by investing in both PMB Technology and BP Plastics 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 PMB Technology and BP Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PMB Technology Bhd and BP Plastics Holding, you can compare the effects of market volatilities on PMB Technology and BP Plastics 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 PMB Technology with a short position of BP Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PMB Technology and BP Plastics.
Diversification Opportunities for PMB Technology and BP Plastics
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PMB and 5100 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PMB Technology Bhd and BP Plastics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Plastics Holding and PMB Technology 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 PMB Technology Bhd are associated (or correlated) with BP Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Plastics Holding has no effect on the direction of PMB Technology i.e., PMB Technology and BP Plastics go up and down completely randomly.
Pair Corralation between PMB Technology and BP Plastics
Assuming the 90 days trading horizon PMB Technology Bhd is expected to under-perform the BP Plastics. In addition to that, PMB Technology is 2.29 times more volatile than BP Plastics Holding. It trades about -0.07 of its total potential returns per unit of risk. BP Plastics Holding is currently generating about -0.05 per unit of volatility. If you would invest 135.00 in BP Plastics Holding on September 1, 2024 and sell it today you would lose (13.00) from holding BP Plastics Holding or give up 9.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PMB Technology Bhd vs. BP Plastics Holding
Performance |
| Timeline |
| PMB Technology Bhd |
| BP Plastics Holding |
PMB Technology and BP Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PMB Technology and BP Plastics
The main advantage of trading using opposite PMB Technology and BP Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PMB Technology position performs unexpectedly, BP Plastics 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 BP Plastics will offset losses from the drop in BP Plastics' long position.| PMB Technology vs. Pantech Group Holdings | PMB Technology vs. Coraza Integrated Technology | PMB Technology vs. Eonmetall Group Bhd |
| BP Plastics vs. Press Metal Bhd | BP Plastics vs. Central Industrial Corp | BP Plastics vs. Cosmos Technology International | BP Plastics vs. Binasat Communications Bhd |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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