Correlation Between Sapura Industrial and Eversafe Rubber

Can any of the company-specific risk be diversified away by investing in both Sapura Industrial and Eversafe Rubber 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 Sapura Industrial and Eversafe Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sapura Industrial Bhd and Eversafe Rubber Bhd, you can compare the effects of market volatilities on Sapura Industrial and Eversafe Rubber 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 Sapura Industrial with a short position of Eversafe Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapura Industrial and Eversafe Rubber.

Diversification Opportunities for Sapura Industrial and Eversafe Rubber

-0.63

Correlation Coefficient

Sapura Industrial  Eversafe Rubber

Excellent diversification

The 3 months correlation between Sapura and Eversafe is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sapura Industrial Bhd and Eversafe Rubber Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversafe Rubber Bhd and Sapura Industrial 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 Sapura Industrial Bhd are associated (or correlated) with Eversafe Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversafe Rubber Bhd has no effect on the direction of Sapura Industrial i.e., Sapura Industrial and Eversafe Rubber go up and down completely randomly.

Pair Corralation between Sapura Industrial and Eversafe Rubber

Assuming the 90 days trading horizon Sapura Industrial Bhd is expected to generate 0.37 times more return on investment than Eversafe Rubber. However, Sapura Industrial Bhd is 2.69 times less risky than Eversafe Rubber. It trades about 0.02 of its potential returns per unit of risk. Eversafe Rubber Bhd is currently generating about -0.04 per unit of risk. If you would invest  81.00  in Sapura Industrial Bhd on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Sapura Industrial Bhd or generate 1.23% return on investment over 90 days.

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

Sapura Industrial Bhd  vs.  Eversafe Rubber Bhd

Sapura Industrial Bhd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapura Industrial Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sapura Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eversafe Rubber Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eversafe Rubber Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sapura Industrial and Eversafe Rubber

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

The idea behind Sapura Industrial Bhd and Eversafe Rubber 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.