Correlation Between MCS Steel and CIMB Thai

Can any of the company-specific risk be diversified away by investing in both MCS Steel and CIMB Thai 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 CIMB Thai 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 CIMB Thai Bank, you can compare the effects of market volatilities on MCS Steel and CIMB Thai 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 CIMB Thai. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCS Steel and CIMB Thai.

Diversification Opportunities for MCS Steel and CIMB Thai

0.86

Correlation Coefficient

MCS Steel  CIMB Thai

Very poor diversification

The 3 months correlation between MCS and CIMB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and CIMB Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB Thai Bank 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 CIMB Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB Thai Bank has no effect on the direction of MCS Steel i.e., MCS Steel and CIMB Thai go up and down completely randomly.

Pair Corralation between MCS Steel and CIMB Thai

Assuming the 90 days trading horizon MCS Steel Public is expected to generate 0.61 times more return on investment than CIMB Thai. However, MCS Steel Public is 1.64 times less risky than CIMB Thai. It trades about -0.29 of its potential returns per unit of risk. CIMB Thai Bank is currently generating about -0.35 per unit of risk. If you would invest  705.00  in MCS Steel Public on October 7, 2024 and sell it today you would lose (45.00) from holding MCS Steel Public or give up 6.38% of portfolio value over 90 days.

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

MCS Steel Public  vs.  CIMB Thai Bank

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

CIMB Thai Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMB Thai Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MCS Steel and CIMB Thai

The main advantage of trading using opposite MCS Steel and CIMB Thai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCS Steel position performs unexpectedly, CIMB Thai 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 CIMB Thai will offset losses from the drop in CIMB Thai's long position.

The idea behind MCS Steel Public and CIMB Thai Bank 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.