Correlation Between Malaysia Steel and Senheng New

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

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

Diversification Opportunities for Malaysia Steel and Senheng New

0.1

Correlation Coefficient

Malaysia Steel  Senheng New

Average diversification

The 3 months correlation between Malaysia and Senheng is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Malaysia Steel Works and Senheng New Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senheng New Retail and Malaysia 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 Malaysia Steel Works are associated (or correlated) with Senheng New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senheng New Retail has no effect on the direction of Malaysia Steel i.e., Malaysia Steel and Senheng New go up and down completely randomly.

Pair Corralation between Malaysia Steel and Senheng New

Assuming the 90 days trading horizon Malaysia Steel Works is expected to generate 0.94 times more return on investment than Senheng New. However, Malaysia Steel Works is 1.06 times less risky than Senheng New. It trades about -0.01 of its potential returns per unit of risk. Senheng New Retail is currently generating about -0.04 per unit of risk. If you would invest  35.00  in Malaysia Steel Works on September 26, 2024 and sell it today you would lose (4.00) from holding Malaysia Steel Works or give up 11.43% of portfolio value over 90 days.

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

Malaysia Steel Works  vs.  Senheng New Retail

Malaysia Steel Works

Risk-Adjusted Performance

0 of 100

Very Weak

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

Senheng New Retail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Senheng New Retail are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Senheng New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Malaysia Steel and Senheng New

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

The idea behind Malaysia Steel Works and Senheng New Retail 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.