Correlation Between Southern Steel and Melewar Industrial
Can any of the company-specific risk be diversified away by investing in both Southern Steel and Melewar Industrial 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 Melewar Industrial 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 Melewar Industrial Group, you can compare the effects of market volatilities on Southern Steel and Melewar Industrial 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 Melewar Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and Melewar Industrial.
Diversification Opportunities for Southern Steel and Melewar Industrial
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southern and Melewar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and Melewar Industrial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melewar Industrial 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 Melewar Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melewar Industrial has no effect on the direction of Southern Steel i.e., Southern Steel and Melewar Industrial go up and down completely randomly.
Pair Corralation between Southern Steel and Melewar Industrial
Assuming the 90 days trading horizon Southern Steel Bhd is expected to generate 1.89 times more return on investment than Melewar Industrial. However, Southern Steel is 1.89 times more volatile than Melewar Industrial Group. It trades about 0.17 of its potential returns per unit of risk. Melewar Industrial Group is currently generating about -0.09 per unit of risk. If you would invest 48.00 in Southern Steel Bhd on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Southern Steel Bhd or generate 14.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Southern Steel Bhd vs. Melewar Industrial Group
Performance |
| Timeline |
| Southern Steel Bhd |
| Melewar Industrial |
Southern Steel and Melewar Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Steel and Melewar Industrial
The main advantage of trading using opposite Southern Steel and Melewar Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Steel position performs unexpectedly, Melewar Industrial 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 Melewar Industrial will offset losses from the drop in Melewar Industrial's long position.The idea behind Southern Steel Bhd and Melewar Industrial Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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