Correlation Between SFP Tech and Leader Steel

Can any of the company-specific risk be diversified away by investing in both SFP Tech and Leader Steel 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 SFP Tech and Leader Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SFP Tech Holdings and Leader Steel Holdings, you can compare the effects of market volatilities on SFP Tech and Leader Steel 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 SFP Tech with a short position of Leader Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFP Tech and Leader Steel.

Diversification Opportunities for SFP Tech and Leader Steel

0.81

Correlation Coefficient

SFP Tech  Leader Steel

Very poor diversification

The 3 months correlation between SFP and Leader is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SFP Tech Holdings and Leader Steel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Steel Holdings and SFP Tech 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 SFP Tech Holdings are associated (or correlated) with Leader Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Steel Holdings has no effect on the direction of SFP Tech i.e., SFP Tech and Leader Steel go up and down completely randomly.

Pair Corralation between SFP Tech and Leader Steel

Assuming the 90 days trading horizon SFP Tech Holdings is expected to under-perform the Leader Steel. In addition to that, SFP Tech is 1.23 times more volatile than Leader Steel Holdings. It trades about -0.32 of its total potential returns per unit of risk. Leader Steel Holdings is currently generating about 0.01 per unit of volatility. If you would invest  41.00  in Leader Steel Holdings on December 28, 2024 and sell it today you would lose (1.00) from holding Leader Steel Holdings or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

SFP Tech Holdings  vs.  Leader Steel Holdings

SFP Tech Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days SFP Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Leader Steel Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leader Steel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Leader Steel 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 SFP Tech and Leader Steel

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

The idea behind SFP Tech Holdings and Leader Steel Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.