Correlation Between Steel Hawk and Malaysia Steel

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

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

Diversification Opportunities for Steel Hawk and Malaysia Steel

-0.41

Correlation Coefficient

Steel Hawk  Malaysia Steel

Very good diversification

The 3 months correlation between Steel and Malaysia is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Steel Hawk Berhad and Malaysia Steel Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaysia Steel Works and Steel Hawk 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 Steel Hawk Berhad are associated (or correlated) with Malaysia Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaysia Steel Works has no effect on the direction of Steel Hawk i.e., Steel Hawk and Malaysia Steel go up and down completely randomly.

Pair Corralation between Steel Hawk and Malaysia Steel

Assuming the 90 days trading horizon Steel Hawk Berhad is expected to generate 2.01 times more return on investment than Malaysia Steel. However, Steel Hawk is 2.01 times more volatile than Malaysia Steel Works. It trades about 0.21 of its potential returns per unit of risk. Malaysia Steel Works is currently generating about 0.01 per unit of risk. If you would invest  29.00  in Steel Hawk Berhad on October 8, 2024 and sell it today you would earn a total of  20.00  from holding Steel Hawk Berhad or generate 68.97% return on investment over 90 days.

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

Steel Hawk Berhad  vs.  Malaysia Steel Works

Steel Hawk Berhad

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Hawk Berhad are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Steel Hawk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Malaysia Steel Works

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Steel Hawk Berhad and Malaysia Steel Works 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.