Correlation Between Mycron Steel and Hengyuan Refining

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

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

Diversification Opportunities for Mycron Steel and Hengyuan Refining

0.2

Correlation Coefficient

Mycron Steel  Hengyuan Refining

Modest diversification

The 3 months correlation between Mycron and Hengyuan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mycron Steel Bhd and Hengyuan Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengyuan Refining and Mycron Steel 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 Mycron Steel Bhd are associated (or correlated) with Hengyuan Refining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengyuan Refining has no effect on the direction of Mycron Steel i.e., Mycron Steel and Hengyuan Refining go up and down completely randomly.

Pair Corralation between Mycron Steel and Hengyuan Refining

Assuming the 90 days trading horizon Mycron Steel Bhd is expected to generate 1.15 times more return on investment than Hengyuan Refining. However, Mycron Steel is 1.15 times more volatile than Hengyuan Refining. It trades about -0.02 of its potential returns per unit of risk. Hengyuan Refining is currently generating about -0.15 per unit of risk. If you would invest  37.00  in Mycron Steel Bhd on October 24, 2024 and sell it today you would lose (2.00) from holding Mycron Steel Bhd or give up 5.41% of portfolio value over 90 days.

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

Mycron Steel Bhd  vs.  Hengyuan Refining

Mycron Steel Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hengyuan Refining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengyuan Refining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Mycron Steel and Hengyuan Refining

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

The idea behind Mycron Steel Bhd and Hengyuan Refining 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.