Correlation Between City Steel and Sawang Export

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

By analyzing existing cross correlation between City Steel Public and Sawang Export Public, you can compare the effects of market volatilities on City Steel and Sawang Export 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 City Steel with a short position of Sawang Export. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Steel and Sawang Export.

Diversification Opportunities for City Steel and Sawang Export

0.69

Correlation Coefficient

City Steel  Sawang Export

Poor diversification

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

Pair Corralation between City Steel and Sawang Export

Assuming the 90 days trading horizon City Steel Public is expected to generate 0.51 times more return on investment than Sawang Export. However, City Steel Public is 1.98 times less risky than Sawang Export. It trades about -0.05 of its potential returns per unit of risk. Sawang Export Public is currently generating about -0.06 per unit of risk. If you would invest  170.00  in City Steel Public on November 29, 2024 and sell it today you would lose (6.00) from holding City Steel Public or give up 3.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

City Steel Public  vs.  Sawang Export Public

City Steel Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Sawang Export Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sawang Export Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with City Steel and Sawang Export

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

The idea behind City Steel Public and Sawang Export Public 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.