Correlation Between Public Bank and Steel Hawk

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

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

Diversification Opportunities for Public Bank and Steel Hawk

-0.24

Correlation Coefficient

Public Bank  Steel Hawk

Very good diversification

The 3 months correlation between Public and Steel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Public Bank Bhd and Steel Hawk Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Hawk Berhad and Public Bank 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 Public Bank Bhd are associated (or correlated) with Steel Hawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Hawk Berhad has no effect on the direction of Public Bank i.e., Public Bank and Steel Hawk go up and down completely randomly.

Pair Corralation between Public Bank and Steel Hawk

Assuming the 90 days trading horizon Public Bank is expected to generate 2.4 times less return on investment than Steel Hawk. But when comparing it to its historical volatility, Public Bank Bhd is 1.96 times less risky than Steel Hawk. It trades about 0.02 of its potential returns per unit of risk. Steel Hawk Berhad is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Steel Hawk Berhad on December 24, 2024 and sell it today you would earn a total of  1.00  from holding Steel Hawk Berhad or generate 2.22% return on investment over 90 days.

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

Public Bank Bhd  vs.  Steel Hawk Berhad

Public Bank Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Public Bank Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Public Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Steel Hawk Berhad

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Hawk Berhad are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Steel Hawk 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 Public Bank and Steel Hawk

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

The idea behind Public Bank Bhd and Steel Hawk Berhad 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.