Correlation Between Minetech Resources and Malaysia Steel

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

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

Diversification Opportunities for Minetech Resources and Malaysia Steel

0.74

Correlation Coefficient

Minetech Resources  Malaysia Steel

Poor diversification

The 3 months correlation between Minetech and Malaysia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Minetech Resources Bhd and Malaysia Steel Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaysia Steel Works and Minetech Resources 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 Minetech Resources Bhd are associated (or correlated) with Malaysia Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaysia Steel Works has no effect on the direction of Minetech Resources i.e., Minetech Resources and Malaysia Steel go up and down completely randomly.

Pair Corralation between Minetech Resources and Malaysia Steel

Assuming the 90 days trading horizon Minetech Resources Bhd is expected to under-perform the Malaysia Steel. In addition to that, Minetech Resources is 2.3 times more volatile than Malaysia Steel Works. It trades about -0.05 of its total potential returns per unit of risk. Malaysia Steel Works is currently generating about -0.09 per unit of volatility. If you would invest  31.00  in Malaysia Steel Works on December 2, 2024 and sell it today you would lose (4.00) from holding Malaysia Steel Works or give up 12.9% of portfolio value over 90 days.

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

Minetech Resources Bhd  vs.  Malaysia Steel Works

Minetech Resources Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minetech Resources Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Malaysia Steel Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malaysia Steel Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Minetech Resources and Malaysia Steel

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

The idea behind Minetech Resources Bhd and Malaysia Steel Works 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..