Correlation Between Lohakit Metal and MCS Steel

Can any of the company-specific risk be diversified away by investing in both Lohakit 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 Lohakit 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 Lohakit Metal Public and MCS Steel Public, you can compare the effects of market volatilities on Lohakit 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 Lohakit Metal with a short position of MCS Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lohakit Metal and MCS Steel.

Diversification Opportunities for Lohakit Metal and MCS Steel

0.8

Correlation Coefficient

Lohakit Metal  MCS Steel

Very poor diversification

The 3 months correlation between Lohakit and MCS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lohakit Metal Public 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 Lohakit 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 Lohakit Metal Public 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 Lohakit Metal i.e., Lohakit Metal and MCS Steel go up and down completely randomly.

Pair Corralation between Lohakit Metal and MCS Steel

Assuming the 90 days trading horizon Lohakit Metal Public is expected to generate 0.44 times more return on investment than MCS Steel. However, Lohakit Metal Public is 2.3 times less risky than MCS Steel. It trades about -0.34 of its potential returns per unit of risk. MCS Steel Public is currently generating about -0.27 per unit of risk. If you would invest  376.00  in Lohakit Metal Public on October 8, 2024 and sell it today you would lose (12.00) from holding Lohakit Metal Public or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Lohakit Metal Public  vs.  MCS Steel Public

Lohakit Metal Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lohakit Metal Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Lohakit Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MCS Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCS Steel Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lohakit Metal and MCS Steel

The main advantage of trading using opposite Lohakit Metal and MCS Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lohakit 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.

The idea behind Lohakit Metal Public 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.