Correlation Between Thai Metal and MCS Steel
Can any of the company-specific risk be diversified away by investing in both Thai 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 Thai 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 Thai Metal Drum and MCS Steel Public, you can compare the effects of market volatilities on Thai 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 Thai Metal with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Metal and MCS Steel.
Diversification Opportunities for Thai Metal and MCS Steel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thai and MCS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum 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 Thai 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 Thai Metal Drum 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 Thai Metal i.e., Thai Metal and MCS Steel go up and down completely randomly.
Pair Corralation between Thai Metal and MCS Steel
Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 1.42 times more return on investment than MCS Steel. However, Thai Metal is 1.42 times more volatile than MCS Steel Public. It trades about 0.06 of its potential returns per unit of risk. MCS Steel Public is currently generating about 0.04 per unit of risk. 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 |
Thai Metal Drum vs. MCS Steel Public
Performance |
| Timeline |
| Thai Metal Drum |
| MCS Steel Public |
Thai Metal and MCS Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thai Metal and MCS Steel
The main advantage of trading using opposite Thai Metal and MCS Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai 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.| Thai Metal vs. Thantawan Industry Public | Thai Metal vs. Thitikorn Public | Thai Metal vs. Siam Steel Service | Thai Metal vs. Thai Vegetable Oil |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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