Correlation Between CSC Steel and Leader Steel
Can any of the company-specific risk be diversified away by investing in both CSC Steel and Leader 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 CSC Steel and Leader Steel 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 Leader Steel Holdings, you can compare the effects of market volatilities on CSC Steel and Leader 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 CSC Steel with a short position of Leader Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSC Steel and Leader Steel.
Diversification Opportunities for CSC Steel and Leader Steel
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSC and Leader is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CSC Steel Holdings and Leader Steel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Steel Holdings 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 Leader Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Steel Holdings has no effect on the direction of CSC Steel i.e., CSC Steel and Leader Steel go up and down completely randomly.
Pair Corralation between CSC Steel and Leader Steel
Assuming the 90 days trading horizon CSC Steel is expected to generate 2.83 times less return on investment than Leader Steel. But when comparing it to its historical volatility, CSC Steel Holdings is 2.98 times less risky than Leader Steel. It trades about 0.02 of its potential returns per unit of risk. Leader Steel Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 48.00 in Leader Steel Holdings on August 24, 2024 and sell it today you would lose (2.00) from holding Leader Steel Holdings or give up 4.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
CSC Steel Holdings vs. Leader Steel Holdings
Performance |
| Timeline |
| CSC Steel Holdings |
| Leader Steel Holdings |
CSC Steel and Leader Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSC Steel and Leader Steel
The main advantage of trading using opposite CSC Steel and Leader Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSC Steel position performs unexpectedly, Leader 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 Leader Steel will offset losses from the drop in Leader Steel's long position.| CSC Steel vs. Press Metal Bhd | CSC Steel vs. PMB Technology Bhd | CSC Steel vs. Pantech Group Holdings | CSC Steel vs. Coraza Integrated Technology |
| Leader Steel vs. Press Metal Bhd | Leader Steel vs. PMB Technology Bhd | Leader Steel vs. Pantech Group Holdings | Leader Steel vs. CSC Steel Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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