Correlation Between Sawang Export and City Steel

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

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

Diversification Opportunities for Sawang Export and City Steel

0.73

Correlation Coefficient

Sawang Export  City Steel

Poor diversification

The 3 months correlation between Sawang and City is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sawang Export Public and City Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Steel Public and Sawang Export 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 Sawang Export Public are associated (or correlated) with City Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Steel Public has no effect on the direction of Sawang Export i.e., Sawang Export and City Steel go up and down completely randomly.

Pair Corralation between Sawang Export and City Steel

Assuming the 90 days trading horizon Sawang Export Public is expected to generate 2.28 times more return on investment than City Steel. However, Sawang Export is 2.28 times more volatile than City Steel Public. It trades about 0.01 of its potential returns per unit of risk. City Steel Public is currently generating about -0.07 per unit of risk. If you would invest  1,140  in Sawang Export Public on December 30, 2024 and sell it today you would lose (80.00) from holding Sawang Export Public or give up 7.02% of portfolio value over 90 days.

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

Sawang Export Public  vs.  City Steel Public

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 somewhat strong basic indicators, Sawang Export is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Sawang Export and City Steel

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

The idea behind Sawang Export Public and City Steel 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.