Correlation Between Kossan Rubber and Supermax Bhd

Can any of the company-specific risk be diversified away by investing in both Kossan Rubber and Supermax Bhd 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 Kossan Rubber and Supermax Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kossan Rubber and Supermax Bhd

0.61

Correlation Coefficient

Kossan Rubber  Supermax Bhd

Poor diversification

The 3 months correlation between Kossan and Supermax is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kossan Rubber Industries and Supermax Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermax Bhd and Kossan Rubber 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 Kossan Rubber Industries are associated (or correlated) with Supermax Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermax Bhd has no effect on the direction of Kossan Rubber i.e., Kossan Rubber and Supermax Bhd go up and down completely randomly.

Pair Corralation between Kossan Rubber and Supermax Bhd

Assuming the 90 days trading horizon Kossan Rubber Industries is expected to generate 1.31 times more return on investment than Supermax Bhd. However, Kossan Rubber is 1.31 times more volatile than Supermax Bhd. It trades about 0.13 of its potential returns per unit of risk. Supermax Bhd is currently generating about 0.03 per unit of risk. If you would invest  191.00  in Kossan Rubber Industries on September 3, 2024 and sell it today you would earn a total of  57.00  from holding Kossan Rubber Industries or generate 29.84% return on investment over 90 days.

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

Kossan Rubber Industries  vs.  Supermax Bhd

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.

Supermax Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Supermax Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Supermax Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kossan Rubber and Supermax Bhd

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

The idea behind Kossan Rubber Industries and Supermax 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..