Correlation Between Leader Steel and Top Glove

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

Diversification Opportunities for Leader Steel and Top Glove

0.69

Correlation Coefficient

Leader Steel  Top Glove

Poor diversification

The 3 months correlation between Leader and Top is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and Top Glove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Glove 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 Top Glove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Glove has no effect on the direction of Leader Steel i.e., Leader Steel and Top Glove go up and down completely randomly.

Pair Corralation between Leader Steel and Top Glove

Assuming the 90 days trading horizon Leader Steel Holdings is expected to generate 1.34 times more return on investment than Top Glove. However, Leader Steel is 1.34 times more volatile than Top Glove. It trades about 0.01 of its potential returns per unit of risk. Top Glove is currently generating about -0.29 per unit of risk. If you would invest  41.00  in Leader Steel Holdings on December 30, 2024 and sell it today you would lose (1.00) from holding Leader Steel Holdings or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Leader Steel Holdings  vs.  Top Glove

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 quite persistent basic indicators, Leader Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Top Glove

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Glove 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 Top Glove

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

The idea behind Leader Steel Holdings and Top Glove 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.