Correlation Between Carlsberg Brewery and Leader Steel

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

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

Diversification Opportunities for Carlsberg Brewery and Leader Steel

0.76

Correlation Coefficient

Carlsberg Brewery  Leader Steel

Poor diversification

The 3 months correlation between Carlsberg and Leader is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and Leader Steel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Steel Holdings and Carlsberg Brewery 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 Carlsberg Brewery Malaysia are associated (or correlated) with Leader Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Steel Holdings has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and Leader Steel go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and Leader Steel

Assuming the 90 days trading horizon Carlsberg Brewery Malaysia is expected to under-perform the Leader Steel. But the stock apears to be less risky and, when comparing its historical volatility, Carlsberg Brewery Malaysia is 4.1 times less risky than Leader Steel. The stock trades about -0.13 of its potential returns per unit of risk. The Leader Steel Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Leader Steel Holdings on December 30, 2024 and sell it today you would lose (1.00) from holding Leader Steel Holdings or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Carlsberg Brewery Malaysia  vs.  Leader Steel Holdings

Carlsberg Brewery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlsberg Brewery Malaysia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Leader Steel Holdings

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Carlsberg Brewery Malaysia and Leader Steel Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.