Correlation Between Southern Steel and Kossan Rubber

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

Diversification Opportunities for Southern Steel and Kossan Rubber

0.57

Correlation Coefficient

Southern Steel  Kossan Rubber

Very weak diversification

The 3 months correlation between Southern and Kossan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries 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 Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of Southern Steel i.e., Southern Steel and Kossan Rubber go up and down completely randomly.

Pair Corralation between Southern Steel and Kossan Rubber

Assuming the 90 days trading horizon Southern Steel Bhd is expected to under-perform the Kossan Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Southern Steel Bhd is 1.1 times less risky than Kossan Rubber. The stock trades about -0.01 of its potential returns per unit of risk. The Kossan Rubber Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  225.00  in Kossan Rubber Industries on September 3, 2024 and sell it today you would earn a total of  23.00  from holding Kossan Rubber Industries or generate 10.22% return on investment over 90 days.

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

Southern Steel Bhd  vs.  Kossan Rubber Industries

Southern Steel Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Steel Bhd are ranked lower than 3 (%) 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 January 2025.

Kossan Rubber Industries

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Southern Steel and Kossan Rubber

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

The idea behind Southern Steel Bhd and Kossan Rubber Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.