Correlation Between Batu Kawan and CSC Steel

Can any of the company-specific risk be diversified away by investing in both Batu Kawan and CSC Steel 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 Batu Kawan and CSC Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Batu Kawan Bhd and CSC Steel Holdings, you can compare the effects of market volatilities on Batu Kawan and CSC Steel 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 Batu Kawan with a short position of CSC Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Batu Kawan and CSC Steel.

Diversification Opportunities for Batu Kawan and CSC Steel

-0.51

Correlation Coefficient

Batu Kawan  CSC Steel

Excellent diversification

The 3 months correlation between Batu and CSC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Batu Kawan Bhd and CSC Steel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSC Steel Holdings and Batu Kawan 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 Batu Kawan Bhd are associated (or correlated) with CSC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSC Steel Holdings has no effect on the direction of Batu Kawan i.e., Batu Kawan and CSC Steel go up and down completely randomly.

Pair Corralation between Batu Kawan and CSC Steel

Assuming the 90 days trading horizon Batu Kawan Bhd is expected to generate 0.4 times more return on investment than CSC Steel. However, Batu Kawan Bhd is 2.48 times less risky than CSC Steel. It trades about 0.09 of its potential returns per unit of risk. CSC Steel Holdings is currently generating about -0.05 per unit of risk. If you would invest  1,960  in Batu Kawan Bhd on September 15, 2024 and sell it today you would earn a total of  44.00  from holding Batu Kawan Bhd or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Batu Kawan Bhd  vs.  CSC Steel Holdings

Batu Kawan Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Batu Kawan Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Batu Kawan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CSC Steel Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSC Steel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CSC Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Batu Kawan and CSC Steel

The main advantage of trading using opposite Batu Kawan and CSC Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Batu Kawan position performs unexpectedly, CSC Steel 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 CSC Steel will offset losses from the drop in CSC Steel's long position.

The idea behind Batu Kawan Bhd and CSC Steel Holdings 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.