Correlation Between Leader Steel and Binasat Communications

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

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

Diversification Opportunities for Leader Steel and Binasat Communications

0.13

Correlation Coefficient

Leader Steel  Binasat Communications

Average diversification

The 3 months correlation between Leader and Binasat is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and Binasat Communications Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binasat Communications and Leader 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 Leader Steel Holdings are associated (or correlated) with Binasat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binasat Communications has no effect on the direction of Leader Steel i.e., Leader Steel and Binasat Communications go up and down completely randomly.

Pair Corralation between Leader Steel and Binasat Communications

Assuming the 90 days trading horizon Leader Steel Holdings is expected to under-perform the Binasat Communications. But the stock apears to be less risky and, when comparing its historical volatility, Leader Steel Holdings is 1.01 times less risky than Binasat Communications. The stock trades about -0.06 of its potential returns per unit of risk. The Binasat Communications Bhd is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Binasat Communications Bhd on September 17, 2024 and sell it today you would lose (2.00) from holding Binasat Communications Bhd or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Leader Steel Holdings  vs.  Binasat Communications Bhd

Leader Steel Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leader Steel Holdings 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.

Binasat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Binasat Communications 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 Leader Steel and Binasat Communications

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

The idea behind Leader Steel Holdings and Binasat Communications 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.