Correlation Between CSC Steel and Binasat Communications
Can any of the company-specific risk be diversified away by investing in both CSC Steel and Binasat Communications 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 CSC Steel and Binasat Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSC Steel Holdings and Binasat Communications Bhd, you can compare the effects of market volatilities on CSC Steel and Binasat Communications 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 CSC Steel with a short position of Binasat Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSC Steel and Binasat Communications.
Diversification Opportunities for CSC Steel and Binasat Communications
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSC and Binasat is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CSC Steel Holdings and Binasat Communications Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binasat Communications and CSC 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 CSC Steel Holdings are associated (or correlated) with Binasat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binasat Communications has no effect on the direction of CSC Steel i.e., CSC Steel and Binasat Communications go up and down completely randomly.
Pair Corralation between CSC Steel and Binasat Communications
Assuming the 90 days trading horizon CSC Steel is expected to generate 9.41 times less return on investment than Binasat Communications. But when comparing it to its historical volatility, CSC Steel Holdings is 3.07 times less risky than Binasat Communications. It trades about 0.01 of its potential returns per unit of risk. Binasat Communications Bhd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Binasat Communications Bhd on August 26, 2024 and sell it today you would earn a total of 0.00 from holding Binasat Communications Bhd or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSC Steel Holdings vs. Binasat Communications Bhd
Performance |
| Timeline |
| CSC Steel Holdings |
| Binasat Communications |
CSC Steel and Binasat Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSC Steel and Binasat Communications
The main advantage of trading using opposite CSC Steel and Binasat Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSC Steel position performs unexpectedly, Binasat Communications 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 Binasat Communications will offset losses from the drop in Binasat Communications' long position.The idea behind CSC Steel Holdings and Binasat Communications 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.| Binasat Communications vs. Digistar Bhd | Binasat Communications vs. Minetech Resources Bhd | Binasat Communications vs. OpenSys M Bhd | Binasat Communications vs. Insas Bhd |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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