Correlation Between Public Bank and Paragon Union

Can any of the company-specific risk be diversified away by investing in both Public Bank and Paragon Union 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 Public Bank and Paragon Union into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Public Bank Bhd and Paragon Union Bhd, you can compare the effects of market volatilities on Public Bank and Paragon Union 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 Public Bank with a short position of Paragon Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Bank and Paragon Union.

Diversification Opportunities for Public Bank and Paragon Union

-0.37

Correlation Coefficient

Public Bank  Paragon Union

Very good diversification

The 3 months correlation between Public and Paragon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and Paragon Union Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Union Bhd and Public Bank 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 Public Bank Bhd are associated (or correlated) with Paragon Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Union Bhd has no effect on the direction of Public Bank i.e., Public Bank and Paragon Union go up and down completely randomly.

Pair Corralation between Public Bank and Paragon Union

Assuming the 90 days trading horizon Public Bank Bhd is expected to generate 0.74 times more return on investment than Paragon Union. However, Public Bank Bhd is 1.36 times less risky than Paragon Union. It trades about 0.08 of its potential returns per unit of risk. Paragon Union Bhd is currently generating about -0.31 per unit of risk. If you would invest  412.00  in Public Bank Bhd on February 15, 2024 and sell it today you would earn a total of  5.00  from holding Public Bank Bhd or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Public Bank Bhd  vs.  Paragon Union Bhd

Public Bank Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Paragon Union Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon Union Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Paragon Union is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Public Bank and Paragon Union

The main advantage of trading using opposite Public Bank and Paragon Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Bank position performs unexpectedly, Paragon Union 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 Paragon Union will offset losses from the drop in Paragon Union's long position.

The idea behind Public Bank Bhd and Paragon Union 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.