Correlation Between Southern Steel and Magni Tech

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Can any of the company-specific risk be diversified away by investing in both Southern Steel and Magni Tech 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 Magni Tech 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 Magni Tech Industries, you can compare the effects of market volatilities on Southern Steel and Magni Tech 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 Magni Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and Magni Tech.

Diversification Opportunities for Southern Steel and Magni Tech

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Southern and Magni is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and Magni Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magni Tech Industries 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 Magni Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magni Tech Industries has no effect on the direction of Southern Steel i.e., Southern Steel and Magni Tech go up and down completely randomly.

Pair Corralation between Southern Steel and Magni Tech

Assuming the 90 days trading horizon Southern Steel Bhd is expected to under-perform the Magni Tech. In addition to that, Southern Steel is 1.57 times more volatile than Magni Tech Industries. It trades about -0.01 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.1 per unit of volatility. If you would invest  214.00  in Magni Tech Industries on September 3, 2024 and sell it today you would earn a total of  56.00  from holding Magni Tech Industries or generate 26.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Southern Steel Bhd  vs.  Magni Tech Industries

 Performance 
       Timeline  
Southern Steel Bhd 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Steel Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Southern Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Magni Tech Industries 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magni Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Southern Steel and Magni Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southern Steel and Magni Tech

The main advantage of trading using opposite Southern Steel and Magni Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Steel position performs unexpectedly, Magni Tech 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 Magni Tech will offset losses from the drop in Magni Tech's long position.
The idea behind Southern Steel Bhd and Magni Tech Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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