Correlation Between Kossan Rubber and Sapura Industrial

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

Diversification Opportunities for Kossan Rubber and Sapura Industrial

0.79

Correlation Coefficient

Kossan Rubber  Sapura Industrial

Poor diversification

The 3 months correlation between Kossan and Sapura is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kossan Rubber Industries and Sapura Industrial Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapura Industrial 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 Sapura Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapura Industrial Bhd has no effect on the direction of Kossan Rubber i.e., Kossan Rubber and Sapura Industrial go up and down completely randomly.

Pair Corralation between Kossan Rubber and Sapura Industrial

Assuming the 90 days trading horizon Kossan Rubber Industries is expected to generate 0.92 times more return on investment than Sapura Industrial. However, Kossan Rubber Industries is 1.09 times less risky than Sapura Industrial. It trades about 0.23 of its potential returns per unit of risk. Sapura Industrial Bhd is currently generating about 0.08 per unit of risk. If you would invest  227.00  in Kossan Rubber Industries on October 8, 2024 and sell it today you would earn a total of  51.00  from holding Kossan Rubber Industries or generate 22.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

Kossan Rubber Industries  vs.  Sapura Industrial Bhd

Kossan Rubber Industries

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kossan Rubber Industries are ranked lower than 21 (%) 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.

Sapura Industrial Bhd

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Kossan Rubber and Sapura Industrial

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

The idea behind Kossan Rubber Industries and Sapura Industrial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .