Correlation Between Southern Steel and MI Technovation

Can any of the company-specific risk be diversified away by investing in both Southern Steel and MI Technovation 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 MI Technovation 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 MI Technovation Bhd, you can compare the effects of market volatilities on Southern Steel and MI Technovation 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 MI Technovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and MI Technovation.

Diversification Opportunities for Southern Steel and MI Technovation

0.17

Correlation Coefficient

Southern Steel  MI Technovation

Average diversification

The 3 months correlation between Southern and 5286 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and MI Technovation Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Technovation Bhd 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 MI Technovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Technovation Bhd has no effect on the direction of Southern Steel i.e., Southern Steel and MI Technovation go up and down completely randomly.

Pair Corralation between Southern Steel and MI Technovation

Assuming the 90 days trading horizon Southern Steel is expected to generate 2.2 times less return on investment than MI Technovation. In addition to that, Southern Steel is 1.25 times more volatile than MI Technovation Bhd. It trades about 0.07 of its total potential returns per unit of risk. MI Technovation Bhd is currently generating about 0.2 per unit of volatility. If you would invest  181.00  in MI Technovation Bhd on September 27, 2024 and sell it today you would earn a total of  42.00  from holding MI Technovation Bhd or generate 23.2% return on investment over 90 days.

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

Southern Steel Bhd  vs.  MI Technovation Bhd

Southern Steel Bhd

Risk-Adjusted Performance

1 of 100

Insignificant

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

MI Technovation Bhd

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MI Technovation Bhd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, MI Technovation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Steel and MI Technovation

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

The idea behind Southern Steel Bhd and MI Technovation Bhd 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.