Correlation Between MCS Steel and Lam Soon
Can any of the company-specific risk be diversified away by investing in both MCS Steel and Lam Soon 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 MCS Steel and Lam Soon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCS Steel Public and Lam Soon Public, you can compare the effects of market volatilities on MCS Steel and Lam Soon 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 MCS Steel with a short position of Lam Soon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCS Steel and Lam Soon.
Diversification Opportunities for MCS Steel and Lam Soon
Significant diversification
The 3 months correlation between MCS and Lam is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Lam Soon Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Soon Public and MCS 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 MCS Steel Public are associated (or correlated) with Lam Soon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Soon Public has no effect on the direction of MCS Steel i.e., MCS Steel and Lam Soon go up and down completely randomly.
Pair Corralation between MCS Steel and Lam Soon
Assuming the 90 days trading horizon MCS Steel Public is expected to under-perform the Lam Soon. In addition to that, MCS Steel is 1.41 times more volatile than Lam Soon Public. It trades about -0.01 of its total potential returns per unit of risk. Lam Soon Public is currently generating about 0.14 per unit of volatility. If you would invest 484.00 in Lam Soon Public on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Lam Soon Public or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCS Steel Public vs. Lam Soon Public
Performance |
| Timeline |
| MCS Steel Public |
| Lam Soon Public |
MCS Steel and Lam Soon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCS Steel and Lam Soon
The main advantage of trading using opposite MCS Steel and Lam Soon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCS Steel position performs unexpectedly, Lam Soon 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 Lam Soon will offset losses from the drop in Lam Soon's long position.The idea behind MCS Steel Public and Lam Soon 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.| Lam Soon vs. Haad Thip Public | Lam Soon vs. Hwa Fong Rubber | Lam Soon vs. GFPT Public | Lam Soon vs. KGI Securities Public |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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