Correlation Between Malaysia Steel and Hibiscus Petroleum
Can any of the company-specific risk be diversified away by investing in both Malaysia Steel and Hibiscus Petroleum 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 Malaysia Steel and Hibiscus Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Malaysia Steel Works and Hibiscus Petroleum BHD, you can compare the effects of market volatilities on Malaysia Steel and Hibiscus Petroleum 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 Malaysia Steel with a short position of Hibiscus Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malaysia Steel and Hibiscus Petroleum.
Diversification Opportunities for Malaysia Steel and Hibiscus Petroleum
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Malaysia and Hibiscus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Malaysia Steel Works and Hibiscus Petroleum BHD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hibiscus Petroleum BHD and Malaysia 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 Malaysia Steel Works are associated (or correlated) with Hibiscus Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hibiscus Petroleum BHD has no effect on the direction of Malaysia Steel i.e., Malaysia Steel and Hibiscus Petroleum go up and down completely randomly.
Pair Corralation between Malaysia Steel and Hibiscus Petroleum
Assuming the 90 days trading horizon Malaysia Steel Works is expected to generate 1.63 times more return on investment than Hibiscus Petroleum. However, Malaysia Steel is 1.63 times more volatile than Hibiscus Petroleum BHD. It trades about 0.07 of its potential returns per unit of risk. Hibiscus Petroleum BHD is currently generating about 0.06 per unit of risk. If you would invest 32.00 in Malaysia Steel Works on September 5, 2024 and sell it today you would earn a total of 1.00 from holding Malaysia Steel Works or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Malaysia Steel Works vs. Hibiscus Petroleum BHD
Performance |
| Timeline |
| Malaysia Steel Works |
| Hibiscus Petroleum BHD |
Malaysia Steel and Hibiscus Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Malaysia Steel and Hibiscus Petroleum
The main advantage of trading using opposite Malaysia Steel and Hibiscus Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malaysia Steel position performs unexpectedly, Hibiscus Petroleum 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 Hibiscus Petroleum will offset losses from the drop in Hibiscus Petroleum's long position.| Malaysia Steel vs. Resintech Bhd | Malaysia Steel vs. MI Technovation Bhd | Malaysia Steel vs. Press Metal Bhd | Malaysia Steel vs. Mercury Industries Bhd |
| Hibiscus Petroleum vs. Malaysia Steel Works | Hibiscus Petroleum vs. Silver Ridge Holdings | Hibiscus Petroleum vs. MClean Technologies Bhd | Hibiscus Petroleum vs. Eonmetall Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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