Correlation Between Mycron Steel and PMB Technology
Can any of the company-specific risk be diversified away by investing in both Mycron Steel and PMB 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 Mycron Steel and PMB Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mycron Steel Bhd and PMB Technology Bhd, you can compare the effects of market volatilities on Mycron Steel and PMB 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 Mycron Steel with a short position of PMB Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mycron Steel and PMB Technology.
Diversification Opportunities for Mycron Steel and PMB Technology
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mycron and PMB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mycron Steel Bhd and PMB Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMB Technology Bhd and Mycron 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 Mycron Steel Bhd are associated (or correlated) with PMB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMB Technology Bhd has no effect on the direction of Mycron Steel i.e., Mycron Steel and PMB Technology go up and down completely randomly.
Pair Corralation between Mycron Steel and PMB Technology
Assuming the 90 days trading horizon Mycron Steel Bhd is expected to generate 1.14 times more return on investment than PMB Technology. However, Mycron Steel is 1.14 times more volatile than PMB Technology Bhd. It trades about 0.02 of its potential returns per unit of risk. PMB Technology Bhd is currently generating about -0.05 per unit of risk. If you would invest 37.00 in Mycron Steel Bhd on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Mycron Steel Bhd or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.51% |
| Values | Daily Returns |
Mycron Steel Bhd vs. PMB Technology Bhd
Performance |
| Timeline |
| Mycron Steel Bhd |
| PMB Technology Bhd |
Mycron Steel and PMB Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mycron Steel and PMB Technology
The main advantage of trading using opposite Mycron Steel and PMB Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mycron Steel position performs unexpectedly, PMB 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 PMB Technology will offset losses from the drop in PMB Technology's long position.The idea behind Mycron Steel Bhd and PMB Technology 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.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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