Correlation Between Central Industrial and Telekom Malaysia
Can any of the company-specific risk be diversified away by investing in both Central Industrial 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 Central Industrial and Telekom Malaysia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Industrial Corp and Telekom Malaysia Bhd, you can compare the effects of market volatilities on Central Industrial 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 Central Industrial with a short position of Telekom Malaysia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Industrial and Telekom Malaysia.
Diversification Opportunities for Central Industrial and Telekom Malaysia
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Central and Telekom is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Central Industrial Corp 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 Central Industrial 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 Central Industrial Corp 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 Central Industrial i.e., Central Industrial and Telekom Malaysia go up and down completely randomly.
Pair Corralation between Central Industrial and Telekom Malaysia
Assuming the 90 days trading horizon Central Industrial Corp is expected to generate 2.6 times more return on investment than Telekom Malaysia. However, Central Industrial is 2.6 times more volatile than Telekom Malaysia Bhd. It trades about 0.03 of its potential returns per unit of risk. Telekom Malaysia Bhd is currently generating about 0.04 per unit of risk. If you would invest 83.00 in Central Industrial Corp on September 5, 2024 and sell it today you would earn a total of 4.00 from holding Central Industrial Corp or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Central Industrial Corp vs. Telekom Malaysia Bhd
Performance |
| Timeline |
| Central Industrial Corp |
| Telekom Malaysia Bhd |
Central Industrial and Telekom Malaysia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Industrial and Telekom Malaysia
The main advantage of trading using opposite Central Industrial and Telekom Malaysia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Industrial 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 Central Industrial Corp 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. Al Aqar Healthcare | Telekom Malaysia vs. YX Precious Metals | Telekom Malaysia vs. YTL Hospitality REIT | Telekom Malaysia vs. Central Industrial Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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