Correlation Between KPJ Healthcare and Southern Steel

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

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

Diversification Opportunities for KPJ Healthcare and Southern Steel

0.26

Correlation Coefficient

KPJ Healthcare  Southern Steel

Modest diversification

The 3 months correlation between KPJ and Southern is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding KPJ Healthcare Bhd and Southern Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Steel Bhd and KPJ Healthcare 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 KPJ Healthcare Bhd are associated (or correlated) with Southern Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Steel Bhd has no effect on the direction of KPJ Healthcare i.e., KPJ Healthcare and Southern Steel go up and down completely randomly.

Pair Corralation between KPJ Healthcare and Southern Steel

Assuming the 90 days trading horizon KPJ Healthcare Bhd is expected to generate 0.45 times more return on investment than Southern Steel. However, KPJ Healthcare Bhd is 2.22 times less risky than Southern Steel. It trades about 0.11 of its potential returns per unit of risk. Southern Steel Bhd is currently generating about 0.01 per unit of risk. If you would invest  98.00  in KPJ Healthcare Bhd on October 24, 2024 and sell it today you would earn a total of  126.00  from holding KPJ Healthcare Bhd or generate 128.57% return on investment over 90 days.

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

KPJ Healthcare Bhd  vs.  Southern Steel Bhd

KPJ Healthcare Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

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

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 February 2025.

Pair Trading with KPJ Healthcare and Southern Steel

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

The idea behind KPJ Healthcare Bhd and Southern Steel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.