Correlation Between Southern Steel and SFP Tech

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

Diversification Opportunities for Southern Steel and SFP Tech

0.28

Correlation Coefficient

Southern Steel  SFP Tech

Modest diversification

The 3 months correlation between Southern and SFP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Southern Steel Bhd and SFP Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFP Tech Holdings 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 SFP Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFP Tech Holdings has no effect on the direction of Southern Steel i.e., Southern Steel and SFP Tech go up and down completely randomly.

Pair Corralation between Southern Steel and SFP Tech

Assuming the 90 days trading horizon Southern Steel Bhd is expected to generate 1.37 times more return on investment than SFP Tech. However, Southern Steel is 1.37 times more volatile than SFP Tech Holdings. It trades about 0.05 of its potential returns per unit of risk. SFP Tech Holdings is currently generating about 0.05 per unit of risk. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Southern Steel Bhd  vs.  SFP Tech Holdings

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.

SFP Tech Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SFP Tech Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, SFP Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Southern Steel and SFP Tech

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

The idea behind Southern Steel Bhd and SFP Tech 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.