Correlation Between 2S Metal and MCS Steel
Can any of the company-specific risk be diversified away by investing in both 2S Metal and MCS Steel 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 2S Metal and MCS Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 2S Metal Public and MCS Steel Public, you can compare the effects of market volatilities on 2S Metal and MCS Steel 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 2S Metal with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2S Metal and MCS Steel.
Diversification Opportunities for 2S Metal and MCS Steel
Poor diversification
The 3 months correlation between 2S Metal and MCS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding 2S Metal Public and MCS Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCS Steel Public and 2S Metal 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 2S Metal Public are associated (or correlated) with MCS Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCS Steel Public has no effect on the direction of 2S Metal i.e., 2S Metal and MCS Steel go up and down completely randomly.
Pair Corralation between 2S Metal and MCS Steel
Assuming the 90 days horizon 2S Metal Public is expected to under-perform the MCS Steel. But the stock apears to be less risky and, when comparing its historical volatility, 2S Metal Public is 43.52 times less risky than MCS Steel. The stock trades about -0.03 of its potential returns per unit of risk. The MCS Steel Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 816.00 in MCS Steel Public on November 27, 2024 and sell it today you would lose (91.00) from holding MCS Steel Public or give up 11.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
2S Metal Public vs. MCS Steel Public
Performance |
| Timeline |
| 2S Metal Public |
| MCS Steel Public |
2S Metal and MCS Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 2S Metal and MCS Steel
The main advantage of trading using opposite 2S Metal and MCS Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2S Metal position performs unexpectedly, MCS Steel 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 MCS Steel will offset losses from the drop in MCS Steel's long position.| 2S Metal vs. Diamond Building Products | 2S Metal vs. MCS Steel Public | 2S Metal vs. Asia Green Energy | 2S Metal vs. Hwa Fong Rubber |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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