Correlation Between Leader Steel and Sime Darby

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

Diversification Opportunities for Leader Steel and Sime Darby

-0.76

Correlation Coefficient

Leader Steel  Sime Darby

Pay attention - limited upside

The 3 months correlation between Leader and Sime is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Leader Steel Holdings and Sime Darby Plantation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Plantation 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 Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Plantation has no effect on the direction of Leader Steel i.e., Leader Steel and Sime Darby go up and down completely randomly.

Pair Corralation between Leader Steel and Sime Darby

Assuming the 90 days trading horizon Leader Steel Holdings is expected to under-perform the Sime Darby. In addition to that, Leader Steel is 1.49 times more volatile than Sime Darby Plantation. It trades about -0.06 of its total potential returns per unit of risk. Sime Darby Plantation is currently generating about 0.08 per unit of volatility. If you would invest  456.00  in Sime Darby Plantation on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Sime Darby Plantation or generate 8.77% return on investment over 90 days.

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

Leader Steel Holdings  vs.  Sime Darby Plantation

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.

Sime Darby Plantation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sime Darby Plantation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sime Darby may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Leader Steel and Sime Darby

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

The idea behind Leader Steel Holdings and Sime Darby Plantation 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 Anywhere module to track or share privately all of your investments from the convenience of any device.