Correlation Between Steel Hawk and Kawan Food

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

Diversification Opportunities for Steel Hawk and Kawan Food

-0.47

Correlation Coefficient

Steel Hawk  Kawan Food

Very good diversification

The 3 months correlation between Steel and Kawan is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Steel Hawk Berhad and Kawan Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawan Food Bhd 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 Kawan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawan Food Bhd has no effect on the direction of Steel Hawk i.e., Steel Hawk and Kawan Food go up and down completely randomly.

Pair Corralation between Steel Hawk and Kawan Food

Assuming the 90 days trading horizon Steel Hawk Berhad is expected to generate 7.0 times more return on investment than Kawan Food. However, Steel Hawk is 7.0 times more volatile than Kawan Food Bhd. It trades about 0.02 of its potential returns per unit of risk. Kawan Food Bhd is currently generating about -0.03 per unit of risk. If you would invest  75.00  in Steel Hawk Berhad on October 10, 2024 and sell it today you would lose (28.00) from holding Steel Hawk Berhad or give up 37.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Steel Hawk Berhad  vs.  Kawan Food Bhd

Steel Hawk Berhad

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Hawk Berhad are ranked lower than 13 (%) 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.

Kawan Food Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawan Food Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kawan Food is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Steel Hawk and Kawan Food

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

The idea behind Steel Hawk Berhad and Kawan Food Bhd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.