Correlation Between Carlsberg Brewery and Southern Steel

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

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

Diversification Opportunities for Carlsberg Brewery and Southern Steel

0.53

Correlation Coefficient

Carlsberg Brewery  Southern Steel

Very weak diversification

The 3 months correlation between Carlsberg and Southern is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and Southern Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Steel Bhd and Carlsberg Brewery 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 Carlsberg Brewery Malaysia are associated (or correlated) with Southern Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Steel Bhd has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and Southern Steel go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and Southern Steel

Assuming the 90 days trading horizon Carlsberg Brewery is expected to generate 1.18 times less return on investment than Southern Steel. But when comparing it to its historical volatility, Carlsberg Brewery Malaysia is 3.2 times less risky than Southern Steel. It trades about 0.13 of its potential returns per unit of risk. Southern Steel Bhd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Southern Steel Bhd on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Southern Steel Bhd or generate 6.12% return on investment over 90 days.

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

Carlsberg Brewery Malaysia  vs.  Southern Steel Bhd

Carlsberg Brewery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Carlsberg Brewery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Southern Steel Bhd

Risk-Adjusted Performance

3 of 100

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.

Pair Trading with Carlsberg Brewery and Southern Steel

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

The idea behind Carlsberg Brewery Malaysia and Southern Steel Bhd 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.