Correlation Between Southern Steel and Cloudpoint Technology

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

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

Diversification Opportunities for Southern Steel and Cloudpoint Technology

0.19

Correlation Coefficient

Southern Steel  Cloudpoint Technology

Average diversification

The 3 months correlation between Southern and Cloudpoint is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and Cloudpoint Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudpoint Technology and Southern 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 Southern Steel Bhd are associated (or correlated) with Cloudpoint Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudpoint Technology has no effect on the direction of Southern Steel i.e., Southern Steel and Cloudpoint Technology go up and down completely randomly.

Pair Corralation between Southern Steel and Cloudpoint Technology

Assuming the 90 days trading horizon Southern Steel Bhd is expected to under-perform the Cloudpoint Technology. But the stock apears to be less risky and, when comparing its historical volatility, Southern Steel Bhd is 1.12 times less risky than Cloudpoint Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Cloudpoint Technology Berhad is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Cloudpoint Technology Berhad on October 9, 2024 and sell it today you would earn a total of  42.00  from holding Cloudpoint Technology Berhad or generate 80.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Southern Steel Bhd  vs.  Cloudpoint Technology Berhad

Southern Steel Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Steel Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Southern Steel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cloudpoint Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudpoint Technology Berhad are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Cloudpoint Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Southern Steel and Cloudpoint Technology

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

The idea behind Southern Steel Bhd and Cloudpoint Technology 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.