Correlation Between Southern Steel and RCE Capital
Can any of the company-specific risk be diversified away by investing in both Southern Steel and RCE Capital 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 RCE Capital 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 RCE Capital Berhad, you can compare the effects of market volatilities on Southern Steel and RCE Capital 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 RCE Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Steel and RCE Capital.
Diversification Opportunities for Southern Steel and RCE Capital
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and RCE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and RCE Capital Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCE Capital Berhad 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 RCE Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCE Capital Berhad has no effect on the direction of Southern Steel i.e., Southern Steel and RCE Capital go up and down completely randomly.
Pair Corralation between Southern Steel and RCE Capital
Assuming the 90 days trading horizon Southern Steel Bhd is expected to generate 1.24 times more return on investment than RCE Capital. However, Southern Steel is 1.24 times more volatile than RCE Capital Berhad. It trades about -0.05 of its potential returns per unit of risk. RCE Capital Berhad is currently generating about -0.13 per unit of risk. If you would invest 52.00 in Southern Steel Bhd on November 3, 2024 and sell it today you would lose (1.00) from holding Southern Steel Bhd or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Steel Bhd vs. RCE Capital Berhad
Performance |
| Timeline |
| Southern Steel Bhd |
| RCE Capital Berhad |
Southern Steel and RCE Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Steel and RCE Capital
The main advantage of trading using opposite Southern Steel and RCE Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Steel position performs unexpectedly, RCE Capital 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 RCE Capital will offset losses from the drop in RCE Capital's long position.| Southern Steel vs. Star Media Group | Southern Steel vs. Hong Leong Bank | Southern Steel vs. ECM Libra Financial | Southern Steel vs. Sports Toto Berhad |
| RCE Capital vs. Apex Healthcare Bhd | RCE Capital vs. DC HEALTHCARE HOLDINGS | RCE Capital vs. FARM FRESH BERHAD | RCE Capital vs. CSC Steel Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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