Correlation Between Erawan and MCS Steel
Can any of the company-specific risk be diversified away by investing in both Erawan 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 Erawan and MCS Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Erawan Group and MCS Steel Public, you can compare the effects of market volatilities on Erawan 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 Erawan with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and MCS Steel.
Diversification Opportunities for Erawan and MCS Steel
Very weak diversification
The 3 months correlation between Erawan and MCS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group 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 Erawan 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 The Erawan Group 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 Erawan i.e., Erawan and MCS Steel go up and down completely randomly.
Pair Corralation between Erawan and MCS Steel
Assuming the 90 days trading horizon Erawan is expected to generate 1.04 times less return on investment than MCS Steel. In addition to that, Erawan is 1.0 times more volatile than MCS Steel Public. It trades about 0.05 of its total potential returns per unit of risk. MCS Steel Public is currently generating about 0.05 per unit of volatility. If you would invest 570.00 in MCS Steel Public on September 12, 2024 and sell it today you would earn a total of 130.00 from holding MCS Steel Public or generate 22.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. MCS Steel Public
Performance |
| Timeline |
| Erawan Group |
| MCS Steel Public |
Erawan and MCS Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and MCS Steel
The main advantage of trading using opposite Erawan and MCS Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan 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.| Erawan vs. Central Plaza Hotel | Erawan vs. Minor International Public | Erawan vs. Central Pattana Public | Erawan vs. CP ALL Public |
| MCS Steel vs. Thantawan Industry Public | MCS Steel vs. The Erawan Group | MCS Steel vs. Jay Mart Public | MCS Steel vs. Airports of Thailand |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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