Correlation Between Absa Group and Malayan Banking

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

Diversification Opportunities for Absa Group and Malayan Banking

-1.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Absa and Malayan is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Limited and Malayan Banking Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malayan Banking Berhad and Absa Group 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 Absa Group Limited are associated (or correlated) with Malayan Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malayan Banking Berhad has no effect on the direction of Absa Group i.e., Absa Group and Malayan Banking go up and down completely randomly.

Pair Corralation between Absa Group and Malayan Banking

If you would invest  199.00  in Malayan Banking Berhad on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Malayan Banking Berhad or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthStrong
Accuracy5.56%
ValuesDaily Returns

Absa Group Limited  vs.  Malayan Banking Berhad

 Performance 
       Timeline  
Absa Group Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Absa Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Malayan Banking Berhad 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Malayan Banking Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Malayan Banking is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Absa Group and Malayan Banking Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Absa Group and Malayan Banking

The main advantage of trading using opposite Absa Group and Malayan Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa Group position performs unexpectedly, Malayan Banking 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 Malayan Banking will offset losses from the drop in Malayan Banking's long position.
The idea behind Absa Group Limited and Malayan Banking Berhad 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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