Correlation Between Leader Steel and CPE Technology

Can any of the company-specific risk be diversified away by investing in both Leader Steel and CPE Technology 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 CPE Technology 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 CPE Technology Berhad, you can compare the effects of market volatilities on Leader Steel and CPE Technology 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 CPE Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Steel and CPE Technology.

Diversification Opportunities for Leader Steel and CPE Technology

0.78

Correlation Coefficient

Leader Steel  CPE Technology

Poor diversification

The 3 months correlation between Leader and CPE is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and CPE Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPE Technology Berhad 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 CPE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPE Technology Berhad has no effect on the direction of Leader Steel i.e., Leader Steel and CPE Technology go up and down completely randomly.

Pair Corralation between Leader Steel and CPE Technology

Assuming the 90 days trading horizon Leader Steel Holdings is expected to generate 1.26 times more return on investment than CPE Technology. However, Leader Steel is 1.26 times more volatile than CPE Technology Berhad. It trades about -0.05 of its potential returns per unit of risk. CPE Technology Berhad is currently generating about -0.16 per unit of risk. If you would invest  41.00  in Leader Steel Holdings on December 23, 2024 and sell it today you would lose (5.00) from holding Leader Steel Holdings or give up 12.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Leader Steel Holdings  vs.  CPE Technology Berhad

Leader Steel Holdings

Risk-Adjusted Performance

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

CPE Technology Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPE Technology Berhad 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 Leader Steel and CPE Technology

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

The idea behind Leader Steel Holdings and CPE Technology Berhad 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..