Correlation Between Pesona Metro and Southern Steel

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

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

Diversification Opportunities for Pesona Metro and Southern Steel

-0.35

Correlation Coefficient

Pesona Metro  Southern Steel

Very good diversification

The 3 months correlation between Pesona and Southern is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pesona Metro Holdings 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 Pesona Metro 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 Pesona Metro Holdings 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 Pesona Metro i.e., Pesona Metro and Southern Steel go up and down completely randomly.

Pair Corralation between Pesona Metro and Southern Steel

Assuming the 90 days trading horizon Pesona Metro Holdings is expected to generate 1.11 times more return on investment than Southern Steel. However, Pesona Metro is 1.11 times more volatile than Southern Steel Bhd. It trades about 0.05 of its potential returns per unit of risk. Southern Steel Bhd is currently generating about -0.28 per unit of risk. If you would invest  28.00  in Pesona Metro Holdings on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Pesona Metro Holdings or generate 7.14% return on investment over 90 days.

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

Pesona Metro Holdings  vs.  Southern Steel Bhd

Pesona Metro Holdings

Risk-Adjusted Performance

Insignificant

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

Southern Steel Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Steel 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.

Pair Trading with Pesona Metro and Southern Steel

The main advantage of trading using opposite Pesona Metro and Southern Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pesona Metro 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 Pesona Metro Holdings 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 Stocks Directory module to find actively traded stocks across global markets.