Correlation Between Land and MCS Steel
Can any of the company-specific risk be diversified away by investing in both Land 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 Land and MCS Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Land and Houses and MCS Steel Public, you can compare the effects of market volatilities on Land 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 Land with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Land and MCS Steel.
Diversification Opportunities for Land and MCS Steel
Very poor diversification
The 3 months correlation between Land and MCS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Land and Houses 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 Land 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 Land and Houses 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 Land i.e., Land and MCS Steel go up and down completely randomly.
Pair Corralation between Land and MCS Steel
Assuming the 90 days horizon Land and Houses is expected to under-perform the MCS Steel. But the stock apears to be less risky and, when comparing its historical volatility, Land and Houses is 49.39 times less risky than MCS Steel. The stock trades about -0.05 of its potential returns per unit of risk. The MCS Steel Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 628.00 in MCS Steel Public on November 3, 2024 and sell it today you would lose (8.00) from holding MCS Steel Public or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Land and Houses vs. MCS Steel Public
Performance |
| Timeline |
| Land and Houses |
| MCS Steel Public |
Land and MCS Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Land and MCS Steel
The main advantage of trading using opposite Land and MCS Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Land 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.The idea behind Land and Houses and MCS Steel Public 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.| MCS Steel vs. Lalin Property Public | MCS Steel vs. Land and Houses | MCS Steel vs. Banpu Public | MCS Steel vs. TISCO Financial Group |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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