Assets correlation in Malaysian stock market before and during pandemic Covid19
Abstract
Stock market volatility is an unsolved issue discussed by many scholars. Uncertain political
scenarios, complex economic issues surrounding and ambiguity of various information are
among the factors contributed to the stock market volatility. This situation is also known as
VUCA environment. Investors and fund managers faced difficulties in making investment
decisions in these macros challenging situation since the element of systematic risks were rising.
It’s also influencing the degree of asset correlation in the stock market and leads to the
diversification strategy problem. In the Modern Portfolio Theory, the elements of investment risk
can be minimized through portfolio diversification. The diversification benefit can be maximized
by combining negative correlation assets in a portfolio. Therefore, objective of the study is to
measure the various values or assets’ correlation in Malaysian stock market for duration of
‘before and during the pandemic covid19’. 13 different types of assets were being analyzed. This
study had provided the lights that asset combination are changes upon market condition.
Comparison of assets correlation between all the sub-period showed that ‘during pandemic’, the
number of negative correlation assets is 36%. This is higher compared to ‘before pandemic’ and
‘whole period’ duration. Utilities (7) and REITs (7) asset sectorial are having highest negative
assets correlation. This condition gave higher opportunities for the fund managers and investors
to minimize their investment risk