Correlation network analysis of the healthcare sector in Malaysia during the COVID-19 pandemic

This study investigates the market performance of 15 companies under healthcare sector that listed on Bursa Malaysia. Data from Eikon Datastream encompassed closing stock prices, market capitalization, and trading volume. The analysis centered on the period surrounding the announcement of the movement control order (MCO) on March 18, 2020, spanning three months before and after this date (90-day interval). The healthcare industry was categorized into health care equipment & services, pharmaceuticals, and health care providers. Most companies adhered to Shariah principles, barring Supermax Corporation. The methodology involved calculating returns, assessing correlations, and constructing a network using a minimum spanning tree approach. The findings uncovered changes, in market dynamics before and after the MCO. Before the MCO was announced there were correlations that showed how the market collectively responded. However after the announcement new correlations emerged, revealing evolving relationships and potential for diversification. The network of correlations showed how connections among companies changed over time providing insights into how they interacted. Based on these observations investors are advised to adapt their strategies by considering changes, in market value, trading volume and correlations. This study enhances our understanding of how the healthcare sector responds to events and helps investors make informed decisions in a dynamic market environment.