Correlation Between Southern Steel and British American
Can any of the company-specific risk be diversified away by investing in both Southern Steel and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Southern Steel and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and British American.
Diversification Opportunities for Southern Steel and British American
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and British is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Southern Steel i.e., Southern Steel and British American go up and down completely randomly.
Pair Corralation between Southern Steel and British American
Assuming the 90 days trading horizon Southern Steel Bhd is expected to under-perform the British American. In addition to that, Southern Steel is 2.25 times more volatile than British American Tobacco. It trades about -0.04 of its total potential returns per unit of risk. British American Tobacco is currently generating about -0.06 per unit of volatility. If you would invest 793.00 in British American Tobacco on November 28, 2024 and sell it today you would lose (113.00) from holding British American Tobacco or give up 14.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Steel Bhd vs. British American Tobacco
Performance |
| Timeline |
| Southern Steel Bhd |
| British American Tobacco |
Southern Steel and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Steel and British American
The main advantage of trading using opposite Southern Steel and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Steel position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Southern Steel vs. Kawan Food Bhd | Southern Steel vs. Carlsberg Brewery Malaysia | Southern Steel vs. Cloudpoint Technology Berhad | Southern Steel vs. Choo Bee Metal |
| British American vs. Awanbiru Technology Bhd | British American vs. Aurelius Technologies Bhd | British American vs. Resintech Bhd | British American vs. Duopharma Biotech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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