Correlation Between MCS Steel and Indara Insurance

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

Diversification Opportunities for MCS Steel and Indara Insurance

0.4

Correlation Coefficient

MCS Steel  Indara Insurance

Very weak diversification

The 3 months correlation between MCS and Indara is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MCS Steel Public and Indara Insurance Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indara Insurance 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 Indara Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indara Insurance Public has no effect on the direction of MCS Steel i.e., MCS Steel and Indara Insurance go up and down completely randomly.

Pair Corralation between MCS Steel and Indara Insurance

Assuming the 90 days trading horizon MCS Steel is expected to generate 5.4 times less return on investment than Indara Insurance. But when comparing it to its historical volatility, MCS Steel Public is 1.67 times less risky than Indara Insurance. It trades about 0.03 of its potential returns per unit of risk. Indara Insurance Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,050  in Indara Insurance Public on December 4, 2024 and sell it today you would earn a total of  1,200  from holding Indara Insurance Public or generate 14.91% return on investment over 90 days.

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

MCS Steel Public  vs.  Indara Insurance Public

MCS Steel Public

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MCS Steel Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MCS Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Indara Insurance Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indara Insurance Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Indara Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MCS Steel and Indara Insurance

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

The idea behind MCS Steel Public and Indara Insurance 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.