Correlation Between Steel Hawk and Shangri La

Can any of the company-specific risk be diversified away by investing in both Steel Hawk and Shangri La 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 Shangri La 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 Shangri La Hotels, you can compare the effects of market volatilities on Steel Hawk and Shangri La 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 Shangri La. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Hawk and Shangri La.

Diversification Opportunities for Steel Hawk and Shangri La

0.22

Correlation Coefficient

Steel Hawk  Shangri La

Modest diversification

The 3 months correlation between Steel and Shangri is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Steel Hawk Berhad and Shangri La Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shangri La Hotels 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 Shangri La. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shangri La Hotels has no effect on the direction of Steel Hawk i.e., Steel Hawk and Shangri La go up and down completely randomly.

Pair Corralation between Steel Hawk and Shangri La

Assuming the 90 days trading horizon Steel Hawk Berhad is expected to generate 5.92 times more return on investment than Shangri La. However, Steel Hawk is 5.92 times more volatile than Shangri La Hotels. It trades about 0.02 of its potential returns per unit of risk. Shangri La Hotels is currently generating about -0.04 per unit of risk. If you would invest  75.00  in Steel Hawk Berhad on October 9, 2024 and sell it today you would lose (26.00) from holding Steel Hawk Berhad or give up 34.67% of portfolio value over 90 days.

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

Steel Hawk Berhad  vs.  Shangri La Hotels

Steel Hawk Berhad

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Hawk Berhad are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Steel Hawk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Shangri La Hotels

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shangri La Hotels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Shangri La 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 Shangri La

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

The idea behind Steel Hawk Berhad and Shangri La Hotels 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.