Correlation Between Steel Hawk and Kossan Rubber

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

Diversification Opportunities for Steel Hawk and Kossan Rubber

0.85

Correlation Coefficient

Steel Hawk  Kossan Rubber

Very poor diversification

The 3 months correlation between Steel and Kossan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Steel Hawk Berhad and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries 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 Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of Steel Hawk i.e., Steel Hawk and Kossan Rubber go up and down completely randomly.

Pair Corralation between Steel Hawk and Kossan Rubber

Assuming the 90 days trading horizon Steel Hawk Berhad is expected to generate 1.86 times more return on investment than Kossan Rubber. However, Steel Hawk is 1.86 times more volatile than Kossan Rubber Industries. It trades about 0.17 of its potential returns per unit of risk. Kossan Rubber Industries is currently generating about 0.14 per unit of risk. If you would invest  31.00  in Steel Hawk Berhad on October 11, 2024 and sell it today you would earn a total of  15.00  from holding Steel Hawk Berhad or generate 48.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Steel Hawk Berhad  vs.  Kossan Rubber Industries

Steel Hawk Berhad

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Hawk Berhad are ranked lower than 12 (%) 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.

Kossan Rubber Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kossan Rubber Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kossan Rubber disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Hawk and Kossan Rubber

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

The idea behind Steel Hawk Berhad and Kossan Rubber Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.