Correlation Between MCS Steel and Thai Metal
Can any of the company-specific risk be diversified away by investing in both MCS Steel and Thai Metal 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 Thai Metal 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 Thai Metal Drum, you can compare the effects of market volatilities on MCS Steel and Thai Metal 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 Thai Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCS Steel and Thai Metal.
Diversification Opportunities for MCS Steel and Thai Metal
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MCS and Thai is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Thai Metal Drum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Metal Drum 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 Thai Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Metal Drum has no effect on the direction of MCS Steel i.e., MCS Steel and Thai Metal go up and down completely randomly.
Pair Corralation between MCS Steel and Thai Metal
Assuming the 90 days trading horizon MCS Steel is expected to generate 2.07 times less return on investment than Thai Metal. But when comparing it to its historical volatility, MCS Steel Public is 1.42 times less risky than Thai Metal. It trades about 0.04 of its potential returns per unit of risk. Thai Metal Drum is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,193 in Thai Metal Drum on September 1, 2024 and sell it today you would earn a total of 267.00 from holding Thai Metal Drum or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.09% |
| Values | Daily Returns |
MCS Steel Public vs. Thai Metal Drum
Performance |
| Timeline |
| MCS Steel Public |
| Thai Metal Drum |
MCS Steel and Thai Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCS Steel and Thai Metal
The main advantage of trading using opposite MCS Steel and Thai Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCS Steel position performs unexpectedly, Thai Metal 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 Thai Metal will offset losses from the drop in Thai Metal's long position.| MCS Steel vs. AAPICO Hitech Public | MCS Steel vs. AP Public | MCS Steel vs. Aikchol Hospital Public | MCS Steel vs. Bank of Ayudhya |
| Thai Metal vs. Thantawan Industry Public | Thai Metal vs. Thitikorn Public | Thai Metal vs. Siam Steel Service | Thai Metal vs. Thai Vegetable Oil |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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