Correlation Between Leader Steel and Eversafe Rubber

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

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

Diversification Opportunities for Leader Steel and Eversafe Rubber

0.39

Correlation Coefficient

Leader Steel  Eversafe Rubber

Weak diversification

The 3 months correlation between Leader and Eversafe is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and Eversafe Rubber Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversafe Rubber Bhd and Leader Steel 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 Leader Steel Holdings are associated (or correlated) with Eversafe Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversafe Rubber Bhd has no effect on the direction of Leader Steel i.e., Leader Steel and Eversafe Rubber go up and down completely randomly.

Pair Corralation between Leader Steel and Eversafe Rubber

Assuming the 90 days trading horizon Leader Steel Holdings is expected to under-perform the Eversafe Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Leader Steel Holdings is 1.43 times less risky than Eversafe Rubber. The stock trades about -0.15 of its potential returns per unit of risk. The Eversafe Rubber Bhd is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Eversafe Rubber Bhd on September 4, 2024 and sell it today you would lose (1.00) from holding Eversafe Rubber Bhd or give up 5.88% of portfolio value over 90 days.

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

Leader Steel Holdings  vs.  Eversafe Rubber Bhd

Leader Steel Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leader Steel Holdings 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Eversafe Rubber Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eversafe Rubber 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Leader Steel and Eversafe Rubber

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

The idea behind Leader Steel Holdings and Eversafe Rubber 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.