Correlation Between Southern Steel and Alliance Financial
Can any of the company-specific risk be diversified away by investing in both Southern Steel and Alliance Financial 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 Southern Steel and Alliance Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Steel Bhd and Alliance Financial Group, you can compare the effects of market volatilities on Southern Steel and Alliance Financial 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 Southern Steel with a short position of Alliance Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and Alliance Financial.
Diversification Opportunities for Southern Steel and Alliance Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Alliance is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and Southern 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 Southern Steel Bhd are associated (or correlated) with Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of Southern Steel i.e., Southern Steel and Alliance Financial go up and down completely randomly.
Pair Corralation between Southern Steel and Alliance Financial
Assuming the 90 days trading horizon Southern Steel is expected to generate 2.53 times less return on investment than Alliance Financial. In addition to that, Southern Steel is 3.29 times more volatile than Alliance Financial Group. It trades about 0.01 of its total potential returns per unit of risk. Alliance Financial Group is currently generating about 0.08 per unit of volatility. If you would invest 331.00 in Alliance Financial Group on August 24, 2024 and sell it today you would earn a total of 168.00 from holding Alliance Financial Group or generate 50.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Steel Bhd vs. Alliance Financial Group
Performance |
| Timeline |
| Southern Steel Bhd |
| Alliance Financial |
Southern Steel and Alliance Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Steel and Alliance Financial
The main advantage of trading using opposite Southern Steel and Alliance Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Steel position performs unexpectedly, Alliance Financial 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 Alliance Financial will offset losses from the drop in Alliance Financial's long position.| Southern Steel vs. Press Metal Bhd | Southern Steel vs. PMB Technology Bhd | Southern Steel vs. Pantech Group Holdings | Southern Steel vs. CSC Steel Holdings |
| Alliance Financial vs. Aeon Credit Service | Alliance Financial vs. Digistar Bhd | Alliance Financial vs. Minetech Resources Bhd | Alliance Financial vs. OpenSys M 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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