Assets Correlation in Malaysian Stock Market Before and During Pandemic Covid19

Abstract

Stock market volatility is anunsolved issuediscussed bymany scholars. Uncertainpolitical scenarios,complex economic issues surrounding and ambiguity of various information are among the factors contributed to the stock market volatility. This situation is alsoknown as VUCA environment. Investors and fund managers faced difficulties in making investment decisionsin these macroschallenging situation since the element of systematic risks were rising. It’salso influencing the degree of asset correlation in the stock market and leadsto 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 differenttypesof 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 assetsis 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.