Correlation Between CPE Technology and Leader Steel

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

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

Diversification Opportunities for CPE Technology and Leader Steel

-0.5

Correlation Coefficient

CPE Technology  Leader Steel

Very good diversification

The 3 months correlation between CPE and Leader is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CPE Technology Berhad 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 CPE Technology 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 CPE Technology Berhad 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 CPE Technology i.e., CPE Technology and Leader Steel go up and down completely randomly.

Pair Corralation between CPE Technology and Leader Steel

Assuming the 90 days trading horizon CPE Technology Berhad is expected to generate 1.13 times more return on investment than Leader Steel. However, CPE Technology is 1.13 times more volatile than Leader Steel Holdings. It trades about 0.05 of its potential returns per unit of risk. Leader Steel Holdings is currently generating about -0.05 per unit of risk. If you would invest  90.00  in CPE Technology Berhad on October 10, 2024 and sell it today you would earn a total of  6.00  from holding CPE Technology Berhad or generate 6.67% return on investment over 90 days.

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

CPE Technology Berhad  vs.  Leader Steel Holdings

CPE Technology Berhad

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CPE Technology Berhad are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, CPE Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Leader Steel Holdings

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with CPE Technology and Leader Steel

The main advantage of trading using opposite CPE Technology and Leader Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPE Technology 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 CPE Technology Berhad 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.